PREM14A 1 ny20010074x1_prem14a.htm PREM14A

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant ☒
Filed by a party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material under §240.14a-12
CAPRI HOLDINGS LIMITED
(Name of Registrant as Specified In Its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
No fee required.
Fee paid previously with preliminary materials.
Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a6(i)(1) and 0-11.

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 2023

Capri Holdings Limited
90 Whitfield Street
2nd Floor
London, United Kingdom
W1T 4EZ
44 207 632 8600

[  ], 2023
Dear Capri Shareholder:
You are cordially invited to attend a special meeting (including any adjournments or postponements thereof, which we refer to as the “Special Meeting”) of shareholders of Capri Holdings Limited, a British Virgin Islands business company (which we refer to as “Capri,” the “Company,” “we,” “us,” and “our”), to be held virtually via live webcast on [  ], 2023, beginning at [  ] (unless the Special Meeting is adjourned or postponed). Capri shareholders will be able to virtually attend and vote at the Special Meeting by visiting www.virtualshareholdermeeting.com/CPRI2023SM, which we refer to as the “Special Meeting website.” For purposes of attendance at the Special Meeting, all references in the enclosed proxy statement to “present” shall mean virtually present at the Special Meeting.
At the Special Meeting, you will be asked to consider and vote on (a) a proposal to adopt a resolution authorizing the Agreement and Plan of Merger, dated as of August 10, 2023 (as it may be amended from time to time, which we refer to as the “Merger Agreement”), by and among Capri, Tapestry, Inc., a Maryland corporation (which we refer to as “Tapestry”), and Sunrise Merger Sub, Inc., a British Virgin Islands business company and a wholly owned subsidiary of Tapestry (which we refer to as “Merger Sub”) (including the Plan of Merger attached thereto) and approving the Merger (as defined below) and the other transactions contemplated by the Merger Agreement (which we refer to as the “Merger Agreement Proposal”), (b) a proposal to approve, on an advisory (nonbinding) basis, the compensation that may be paid or become payable to Capri’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (which we refer to as the “Compensation Proposal”) and (c) a proposal to adjourn the Special Meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (which we refer to as the “Adjournment Proposal”). Pursuant to the terms of the Merger Agreement, subject to the terms and conditions set forth therein, Merger Sub will merge with and into Capri (which we refer to as the “Merger”), with Capri continuing as the surviving company in the Merger and as a wholly owned subsidiary of Tapestry.
The Merger Agreement provides that, subject to certain exceptions, each ordinary share, no par value, of Capri (which we refer to as “Capri ordinary shares”) outstanding immediately prior to the effective time of the Merger (which we refer to as the “Effective Time”) will, at the Effective Time, automatically be cancelled and the holder shall have the right to receive $57.00 in cash, without interest (which we refer to as the “Merger Consideration”), subject to any required tax withholding.
If the Merger is completed, you will be entitled to receive the Merger Consideration, less any applicable withholding taxes, for each Capri ordinary share that you own immediately prior to the Effective Time.
The Board of Directors of Capri (which we refer to as the “Board of Directors”), after considering the factors more fully described in the enclosed proxy statement, has unanimously: (a) determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (b) recommended that the shareholders of Capri adopt a resolution authorizing the Merger Agreement and the Plan of Merger and approve the Merger and the other transactions contemplated by the Merger Agreement,

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and (c) resolved to submit such matters for approval by Capri shareholders at the Special Meeting. The Board of Directors unanimously recommends that you vote: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
The enclosed proxy statement provides detailed information about the Special Meeting, the Merger Agreement and the Merger. A copy of the Merger Agreement is attached as Annex A to the proxy statement.
The proxy statement also describes the actions and determinations of the Board of Directors in connection with its evaluation of the Merger Agreement and the Merger. You should carefully read and consider the entire enclosed proxy statement and its annexes, including the Merger Agreement, as they contain important information about, among other things, the Merger and how it affects you.
Whether or not you plan to attend the virtual Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”). If you attend the Special Meeting and vote thereat, your vote will revoke any proxy that you have previously submitted.
If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the Merger Agreement Proposal, without your instructions.
Your vote is very important, regardless of the number of shares that you own. We cannot complete the Merger unless the Merger Agreement Proposal is approved by the affirmative vote of the holders of a majority of the outstanding Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote thereon at the Special Meeting. If you have any questions or need assistance voting your shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free: (877) 800-5195
Banks and brokers may call collect: (212) 750-5833
On behalf of the Board of Directors, I thank you for your support and appreciate your consideration of these matters.
 
Sincerely,
 
 
 
John D. Idol
 
 
 
Chairman and Chief Executive Officer
 
Capri Holdings Limited
Neither the Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved the Merger, passed upon the merits or fairness of the Merger or passed upon the adequacy or accuracy of the disclosure in this document. Any representation to the contrary is a criminal offense.
The accompanying proxy statement is dated [  ], 2023, and, together with the enclosed form of proxy card, is first being mailed to Capri shareholders on or about [  ], 2023.

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PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED SEPTEMBER 8, 2023

Capri Holdings Limited
90 Whitfield Street
2nd Floor
London, United Kingdom
W1T 4EZ
44 207 632 8600
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON [  ], 2023
Notice is hereby given that a special meeting (including any adjournments or postponements thereof, which we refer to as the “Special Meeting”) of shareholders of Capri Holdings Limited, a British Virgin Islands business company (which we refer to as “Capri,” the “Company,” “we,” “us,” and “our”), will be held virtually via live webcast on [  ], 2023, beginning at [  ] (unless the Special Meeting is adjourned or postponed). Capri shareholders will be able to virtually attend and vote at the Special Meeting by visiting www.virtualshareholdermeeting.com/CPRI2023SM, which we refer to as the “Special Meeting website.” For purposes of attendance at the Special Meeting, all references in the enclosed proxy statement to “present” shall mean virtually present at the Special Meeting. The Special Meeting is being held for the following purposes:
1.
To consider and vote on the proposal to adopt a resolution authorizing the Agreement and Plan of Merger, dated as of August 10, 2023 (as it may be amended from time to time, which we refer to as the “Merger Agreement”), by and among Capri, Tapestry, Inc., a Maryland corporation (which we refer to as “Tapestry”), and Sunrise Merger Sub, Inc., a British Virgin Islands business company and a wholly owned subsidiary of Tapestry (which we refer to as “Merger Sub”) (including the Plan of Merger attached thereto) and approving the Merger and the other transactions contemplated by the Merger Agreement. Pursuant to the terms of the Merger Agreement, subject to the terms and conditions set forth therein, Merger Sub will merge with and into Capri (which we refer to as the “Merger”), with Capri continuing as the surviving company in the Merger and as a wholly owned subsidiary of Tapestry (which we refer to as the “Merger Agreement Proposal”);
2.
To consider and vote on the proposal to approve, on an advisory (nonbinding) basis, the compensation that may be paid or become payable to Capri’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (which we refer to as the “Compensation Proposal”); and
3.
To consider and vote on any proposal to adjourn the Special Meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting (which we refer to as the “Adjournment Proposal”).
Only Capri shareholders of record as of the close of business on [  ], 2023 are entitled to notice of the Special Meeting and to vote at the Special Meeting or any adjournment, postponement or other delay thereof.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Whether or not you plan to attend the virtual Special Meeting, please sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”). If you attend the Special Meeting and vote thereat, your vote will revoke any proxy that you have previously submitted. If you hold your shares in “street name,” you should instruct your bank, broker or other nominee how to vote your shares in accordance with the voting instruction form that you will receive from your bank, broker or other nominee. Your bank, broker or other nominee cannot vote on any of the proposals, including the Merger Agreement Proposal, without your instructions.

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If you sign, date and mail your proxy card without indicating how you wish to vote, your proxy will be counted as a vote “FOR” the Merger Agreement Proposal, “FOR” the Compensation Proposal and “FOR” the Adjournment Proposal.
 
By Order of the Board of Directors,
 
 
 
 
 
John D. Idol
 
 
 
Chairman and Chief Executive Officer
 
Capri Holdings Limited
 
 
 
Dated: [  ], 2023

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YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, WE ENCOURAGE YOU TO SUBMIT YOUR PROXY AS PROMPTLY AS POSSIBLE: (1) BY TELEPHONE; (2) OVER THE INTERNET; OR (3) BY SIGNING AND DATING THE ENCLOSED PROXY CARD AND RETURNING IT IN THE POSTAGE-PAID ENVELOPE PROVIDED. You may revoke your proxy or change your vote before the Special Meeting in the manner described in the enclosed proxy statement.
If you fail to (1) return your proxy card, (2) grant your proxy electronically over the Internet or by telephone or (3) attend the Special Meeting, your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting and, if a quorum is present, will have the same effect as a vote “AGAINST” the Merger Agreement Proposal but, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal.
You should carefully read and consider the entire accompanying proxy statement and its annexes, including the Merger Agreement, along with all of the documents incorporated by reference into the accompanying proxy statement, as they contain important information about, among other things, the Merger and how it affects you. If you have any questions concerning the Merger Agreement, the Merger, the Special Meeting or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your Capri ordinary shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free: (877) 800-5195
Banks and brokers may call collect: (212) 750-5833

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SUMMARY
This summary highlights selected information from this proxy statement related to the Merger and may not contain all of the information that is important to you. To understand the Merger more fully and for a more complete description of the legal terms of the Merger, you should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including the Merger Agreement (as defined below), along with all of the documents to which we refer in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement entitled “Where You Can Find More Information.” A copy of the Merger Agreement is attached as Annex A to this proxy statement. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger.
Except as otherwise specifically noted in this proxy statement, “Capri,” “we,” “our,” “us,” the “Company” and similar words refer to Capri Holdings Limited. Throughout this proxy statement, we refer to Tapestry, Inc. as “Tapestry,” Sunrise Merger Sub, Inc. as “Merger Sub,” and Capri, Tapestry, and Merger Sub each as a “party” and together as the “parties.” In addition, throughout this proxy statement we refer to the Agreement and Plan of Merger, dated as of August 10, 2023 (as it may be amended from time to time), by and among Capri, Tapestry, and Merger Sub as the “Merger Agreement”; our ordinary shares, no par value, as “Capri ordinary shares”; and the holders of Capri ordinary shares as “Capri shareholders.” Unless indicated otherwise, any other capitalized term used herein but not otherwise defined herein has the meaning assigned to such term in the Merger Agreement.
Parties Involved in the Merger (see page 21)
Capri Holdings Limited
Capri is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors. Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands. We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories. Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve. Capri ordinary shares are listed on the New York Stock Exchange (which we refer to as the “NYSE”) under the symbol “CPRI.”
Tapestry, Inc.
Tapestry, a Maryland corporation, is a global house of brands that unites the magic of Coach, kate spade new york and Stuart Weitzman. Each of Tapestry’s brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. Tapestry uses its collective strengths to move its customers and empower its communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse. Tapestry’s common stock is listed on the NYSE under the symbol “TPR.”
Sunrise Merger Sub, Inc.
Merger Sub is a British Virgin Islands (“BVI”) business company limited by shares with BVI company number 2129509 and a wholly owned subsidiary of Tapestry that was formed solely for the purposes of entering into the Merger Agreement and related agreements and consummating the transactions contemplated thereby. Merger Sub has not engaged in any business activities to date other than in connection with the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, at the Effective Time (as defined below), Merger Sub will merge with and into Capri and will cease to exist.
The Merger (see page 55)
On the terms and subject to the conditions of the Merger Agreement, and in accordance with the BVI Business Companies Act (Revised Edition 2020) (as amended) (which we refer to as the “BVI Act”), Merger Sub will merge with and into Capri (which we refer to as the “Merger”), the separate corporate existence of Merger Sub will cease and Capri will continue its corporate existence under the BVI Act as the surviving BVI business company in the Merger (which we refer to as the “Surviving Company”). As a result of the Merger, Capri ordinary shares will no longer be publicly traded and will be delisted from the NYSE. In addition, Capri ordinary shares will be deregistered under the Securities Exchange Act of 1934, as amended (which we refer to as the “Exchange Act”), and Capri will
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no longer file periodic or other reports with the United States Securities and Exchange Commission (which we refer to as the “SEC”). If the Merger is completed, you will not own any ordinary shares of the Surviving Company. The Merger will become effective at such time as the articles of merger with respect to the Merger have been duly registered by the Registrar of Corporate Affairs of the British Virgin Islands (which we refer to as the “Registrar”) or at such later date or time as may be agreed by Capri and Tapestry and specified in the articles of merger in accordance with the BVI Act (which we refer to as the “Effective Time”).
Merger Consideration (see page 56)
Capri Ordinary Shares
At the Effective Time, by virtue of the Merger and without any action on the part of Capri, Tapestry, Merger Sub, or the holders of any securities of Capri or Merger Sub, each Capri ordinary share issued and outstanding immediately prior to the Effective Time (other than (a) each share that is owned or held in treasury by Capri or is owned by Tapestry or any of its direct or indirect subsidiaries, which will be cancelled and will cease to exist (which we refer to as “Cancelled Shares”) and (b) each share held by a shareholder who properly demands in writing, and does not withdraw or lose, its dissenters’ rights in accordance with Section 179 of the BVI Act and otherwise complies with all provisions of the BVI Act relevant to the exercise and perfection of dissenters’ rights (which we refer to as the “Dissenting Shares”)) will be cancelled and the holder will receive the right to receive $57.00 in cash, without interest (which we refer to as the “Merger Consideration”), subject to any required tax withholding.
At or prior to the Effective Time, Tapestry will deposit (or cause to be deposited) with a designated exchange agent a cash amount that is sufficient to pay the aggregate Merger Consideration in exchange for all Capri ordinary shares outstanding immediately prior to the Effective Time (other than Cancelled Shares and Dissenting Shares). For more information, please see the section of this proxy statement entitled “The Merger Agreement — Exchange and Payment Procedures.”
After the Merger is completed, you will have the right to receive the Merger Consideration in respect of each Capri ordinary share that you own (other than any Cancelled Shares or Dissenting Shares) immediately prior to the Effective Time (subject to any required tax withholding), but you will no longer have any rights as a Capri shareholder (except for Capri shareholders who properly demand in writing, and do not withdraw or lose, their dissenters’ rights in accordance with Section 179 of the BVI Act and otherwise comply with all provisions of the BVI Act relevant to the exercise and perfection of dissenters’ rights, who shall only have such rights as prescribed by the BVI Act). For more information, please see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Dissenters’ Rights.”
Treatment of Capri Equity Awards
At the Effective Time, (i) each outstanding option to purchase Capri ordinary shares (which we refer to as a “Capri Option”) with a per share exercise price equal to or in excess of the Merger Consideration will be converted automatically into an option to purchase shares of Tapestry common stock (which we refer to as a “Tapestry Option”), adjusted based on the Conversion Ratio, (ii) each outstanding Capri Option with a per share exercise price that is less than the Merger Consideration will be cancelled in exchange for an amount in cash equal to the excess of the Merger Consideration over the per share exercise price applicable to the Capri Option, (iii) each restricted share unit award relating to Capri ordinary shares (which we refer to as a “Capri RSU”) that is held by a non-employee director or named executive officer of Capri will vest and will be exchanged for the Merger Consideration in respect of each Capri ordinary share subject to such Capri RSU immediately prior to the Effective Time, (iv) each Capri RSU (other than any Capri RSU covered by the preceding clause (iii)) will be converted automatically into a restricted share unit award with respect to shares of Tapestry common stock (which we refer to as a “Tapestry RSU”), adjusted based on the Conversion Ratio, and (v) each restricted share unit award relating to Capri ordinary shares for which vesting is conditioned in whole or in part based on achievement of performance goals or metrics and for which the applicable performance period has not been completed as of the applicable determination date (which we refer to as a “Capri PSU”) will vest and will be exchanged for the Merger Consideration in respect of each Capri ordinary share subject to such Capri PSU immediately prior to the Effective Time (with the number of Capri ordinary shares subject to such Capri PSU determined based on (x) actual performance as determined by the Compensation and Talent Committee of the Board of Directors of Capri (which we refer to as the “Compensation Committee”) for any fully completed measurement period or performance period, as applicable, ended prior to the Effective Time to the extent the Compensation Committee can reasonably determine the level of
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achievement of performance for such completed measurement period or performance period, as applicable, prior to the Effective Time, and (y) target performance for any measurement period or performance period, as applicable, for which performance has not previously been determined). Each such converted Tapestry equity award will be subject to the same terms and conditions (including vesting terms and terms related to the treatment upon termination of employment) as applied to the corresponding Capri equity award. For purposes of the Merger Agreement, the “Conversion Ratio” means the quotient, rounded to the second decimal place, of (A) the Merger Consideration divided by (B) the volume weighted average closing sale price of one share of Tapestry common stock as reported on the New York Stock Exchange for the 10 consecutive full trading days ending on the trading day immediately preceding the Closing Date (as defined below).
For more information, please see the section of this proxy statement entitled “The Merger Agreement — Merger Consideration — Treatment of Capri Equity Awards.”
Material U.S. Federal Income Tax Consequences of the Merger (see page 51)
The exchange of Capri ordinary shares for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Material U.S. Federal Income Tax Consequences of the Merger”) who exchanges Capri ordinary shares for cash in the Merger generally will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of cash that such U.S. Holder receives in the Merger and (ii) such U.S. Holder’s adjusted tax basis in the Capri ordinary shares surrendered in exchange therefor.
For more information, please see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Material U.S. Federal Income Tax Consequences of the Merger.” This proxy statement contains a general discussion of certain material U.S. federal income tax consequences of the Merger. You should consult your tax advisor to determine the particular tax consequences to you of the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).
Dissenters’ Rights (see page 49)
At or from the Effective Time, all Dissenting Shares shall automatically be cancelled and each holder of Dissenting Shares shall cease to be a shareholder of Capri (and shall not be a shareholder of the Surviving Company) and shall cease to have any rights thereto (including any right to receive such holder’s portion of the aggregate Merger Consideration), subject to and except for such rights as are granted under Section 179 of the BVI Act.
Pursuant to Section 179 of the BVI Act, Capri shareholders who properly demand in writing, and do not withdraw or lose, their dissenters’ rights in accordance with Section 179 of the BVI Act and otherwise comply with all provisions of the BVI Act relevant to the exercise and perfection of dissenters’ rights, are entitled to payment of the fair value of their Capri ordinary shares.
If any holder of Capri ordinary shares (other than a holder of Capri ordinary shares who consented in writing to the Capri Shareholder Approval) fails to give written objection to the Merger within the terms of Section 179 of the BVI Act, or otherwise fails to validly dissent in accordance with the terms of Section 179 of the BVI Act, then the rights of such holder under Section 179 of the BVI Act shall cease to exist, and the underlying Capri ordinary shares shall be cancelled, and the holder shall only be entitled to receive such holder’s portion of the aggregate Merger Consideration.
Only Capri shareholders of record may dissent. Any shares held in “street name” will need to be transferred to you before you may dissent.
Regulatory Approvals Required for the Merger (see page 53)
U.S. Regulatory Clearances
Under the Merger Agreement, the Merger cannot be completed until the waiting period applicable to the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (which we refer to as the “HSR Act”), has expired or been terminated and any and all agreements with governmental entities pursuant to which such parties have agreed not to consummate the transactions contemplated by the Merger Agreement until a specified time that have been entered into in accordance with the Merger Agreement have expired, been terminated or been waived. Tapestry and Capri made the filings required under the HSR Act on August 31, 2023.
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Other Regulatory Clearances
The Merger is also subject to receipt of regulatory approvals in certain other jurisdictions. In particular, the Merger is subject to clearance or approval under the antitrust laws in Australia, Canada, China, the EU (or, in the alternative, under the national merger control regimes of certain EU member states), Japan, Korea, and the United Kingdom. The Merger is also subject to approval by the European Commission under the EU Foreign Subsidies Regulation (Regulation EU 2022/2560).
For more information, please see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Regulatory Approvals Required for the Merger.” In each case, the Merger cannot be completed until the parties obtain clearance or approval to consummate the Merger or the applicable waiting periods have expired or been terminated unless the condition is waived. Subject to the terms and conditions of the Merger Agreement, the parties have agreed to cooperate with each other and use their reasonable best efforts to make these filings as promptly as reasonably practicable.
Closing Conditions (see page 73)
The obligations of the parties to consummate the Merger are subject to the satisfaction or waiver of customary conditions, including (among other conditions) the following:
the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Capri ordinary shares;
the absence of any law, order, injunction or timing agreement issued by any governmental entity of competent jurisdiction in certain applicable jurisdictions that has the effect of restraining, enjoining or otherwise prohibiting the consummation of the Merger;
the expiration or termination of the waiting period applicable to the consummation of the Merger and other transactions contemplated by the Merger Agreement under the HSR Act and the completion, expiration, or termination of all applicable filings, registrations, waiting periods and approvals under certain other applicable regulatory laws;
the accuracy of the representations and warranties contained in the Merger Agreement (subject to certain materiality qualifiers); and
the compliance with and performance by the parties, in all material respects, of their respective covenants and obligations required by the Merger Agreement to be complied with or performed by such parties at or prior to the Closing (as defined below).
Financing of the Merger (see page 48)
Tapestry intends to fund the Merger, the repayment of certain indebtedness of Capri and related transaction costs (which we refer to as the “Financing Amounts”) with a combination of cash on hand and the proceeds from (a) one or more issuances of senior unsecured debt securities or the borrowing of senior unsecured term loans, or a combination of the foregoing, and/or (b) a committed bridge facility. The funding of the bridge facility, to the extent necessary, is subject to customary conditions. The completion of the Merger is not subject to any financing condition.
Required Shareholder Approval (see page 17)
The affirmative vote of the holders of a majority of the outstanding Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote thereon is required to adopt the Merger Agreement (which we refer to as the “Merger Agreement Proposal”). As of [ ], 2023 (which we refer to as the “Record Date”), [ ] votes constitute a majority of the outstanding Capri ordinary shares entitled to vote thereon. Approval of the proposal to approve, on an advisory (nonbinding) basis, the compensation that may be paid or become payable to Capri’s named executive officers that is based on or otherwise relates to the Merger Agreement and the transactions contemplated by the Merger Agreement (which we refer to as the “Compensation Proposal”) requires the affirmative vote of a majority of the votes of the Capri ordinary shares present virtually or represented by proxy at the special meeting of Capri shareholders (such meeting, the “Special Meeting”) and entitled to vote on the Compensation Proposal. Approval of the proposal to adjourn the Special Meeting (which we refer to as the “Adjournment Proposal”) requires the affirmative vote of a majority of the votes of the Capri ordinary shares present
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virtually or represented by proxy at the Special Meeting and entitled to vote on the Adjournment Proposal. The approval of the Compensation Proposal is advisory (nonbinding) and is not a condition to the completion of the Merger.
As of the Record Date, our directors and executive officers beneficially owned and were entitled to vote, in the aggregate, [ ] Capri ordinary shares, representing approximately [ ]% of the Capri ordinary shares outstanding as of the Record Date. We currently expect that our directors and executive officers will vote all of their respective Capri ordinary shares: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal, although none of them have entered into any agreements obligating them to do so.
The Special Meeting (see page 17)
Date, Time and Location
The Special Meeting to consider and vote on the proposal to adopt the Merger Agreement will be held virtually via live webcast on [ ], 2023, beginning at [ ] (unless the Special Meeting is adjourned or postponed). Capri shareholders will be able to virtually attend and vote at the Special Meeting by visiting www.virtualshareholdermeeting.com/CPRI2023SM, which we refer to as the “Special Meeting website.” For purposes of attendance at the Special Meeting, all references in this proxy statement to “present” shall mean virtually present at the Special Meeting.
Record Date; Shares Entitled to Vote
You are entitled to vote at the Special Meeting if you owned Capri ordinary shares at the close of business on [ ], 2023, which we refer to as the “Record Date.” Each Capri shareholder shall be entitled to one vote for each such Capri ordinary share owned at the close of business on the Record Date.
Quorum
As of the Record Date, there were [ ] Capri ordinary shares outstanding and entitled to vote at the Special Meeting. The presence, in person, or by remote communication, or represented by proxy, of not less than 50 percent of the votes of the Capri ordinary shares entitled to vote on resolutions of members to be considered at the Special Meeting will constitute a quorum at the Special Meeting.
Recommendation of the Capri Board of Directors (see page 31)
The Board of Directors of Capri (which we refer to as the “Board of Directors”) has unanimously: (a) determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (b) recommended that the shareholders of Capri adopt a resolution authorizing the Merger Agreement and the Plan of Merger and approve the Merger and the other transactions contemplated by the Merger Agreement, and (c) resolved to submit such matters for approval by Capri shareholders at the Special Meeting.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Opinion of Barclays Capital Inc. (see page 35)
On August 9, 2023, Barclays Capital Inc. (which we refer to as “Barclays”) rendered its oral opinion (which was subsequently confirmed in writing) to the Board of Directors that, as of the date of such opinion and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the shareholders of Capri in the Merger is fair to such shareholders from a financial point of view.
The full text of Barclays’ written opinion is attached as Annex B to this proxy statement. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety.
For a further discussion of Barclays’ opinion, see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Opinion of Barclays Capital Inc.”
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Interests of Capri’s Executive Officers and Directors in the Merger (see page 43)
Capri’s executive officers and directors have certain interests in the Merger that are different from, or in addition to, those of Capri shareholders. See “Proposal 1: Adoption of the Merger Agreement — Interests of Capri’s Executive Officers and Directors in the Merger” for additional information about interests that Capri’s executive officers and directors have in the Merger that are different than yours.
Non-Solicitation Covenant (see page 64)
During the period commencing on the date of the Merger Agreement and ending as of the earlier of the Effective Time or the valid termination of the Merger Agreement pursuant to the Merger Agreement (which we refer to as the “Pre-Closing Period”), Capri has agreed that it will not, and will cause its controlled affiliates and all of its directors and officers and any of their other respective representatives acting on their behalf not to, directly or indirectly: solicit, initiate or knowingly facilitate or knowingly encourage the making or submission of any proposal or offer which constitutes or would reasonably be expected to lead to an Acquisition Proposal (as defined in the section of this proxy statement entitled “The Merger Agreement — Non-Solicitation Covenant”); participate in any negotiations regarding, or furnish to any person any information relating to Capri or any of its subsidiaries in connection with an Acquisition Proposal; withdraw, amend or otherwise propose to withdraw or amend, in a manner adverse to Tapestry, the Board of Directors’ recommendation in favor of Capri’s shareholders approving the Merger Agreement; fail to publicly recommend against any publicly disclosed Acquisition Proposal or reaffirm the Board of Directors’ recommendation within 10 business days after such public disclosure; fail to include the Board of Directors’ recommendation in this proxy statement; approve, authorize or permit entry into any merger agreement, acquisition agreement, letter of intent or similar agreement with respect to any Acquisition Proposal; call or convene a meeting of Capri’s shareholders to consider a proposal that would reasonably be expected to materially impair, prevent or delay the consummation of the Merger and the other transactions contemplated by the Merger Agreement; or resolve to do any of the foregoing.
Capri has agreed that it will, and will cause its controlled affiliates and its directors and officers and any of their other respective representatives acting on their behalf to, cease any existing activities with respect to any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal. Capri has agreed to promptly (and in any event within two business days of the date of the Merger Agreement) request that each third party that had executed a confidentiality agreement in connection with its consideration of an Acquisition Proposal return or destroy all nonpublic information furnished by Capri or any of its representatives, and Capri has agreed to terminate access to any physical or electronic data rooms relating to an acquisition of Capri or any portion thereof by such person and its representatives. For more information, please see the section of this proxy statement entitled “The Merger Agreement — Non-Solicitation Covenant.”
Prior to the adoption of the Merger Agreement Proposal by Capri shareholders, the Board of Directors is entitled to change its recommendation regarding adoption of the Merger Agreement and/or to terminate the Merger Agreement, as applicable, for the purpose of entering into an agreement in respect of a Superior Proposal or in light of an Intervening Event (as defined in the section of this proxy statement entitled “The Merger Agreement — The Board of Directors’ Recommendation; Change of Recommendation”) if it complies with certain procedures in the Merger Agreement, including giving Tapestry appropriate notice of such intention and negotiating further in good faith with Tapestry at Tapestry’s option before the Board of Directors determines in good faith, after having consulted with its outside counsel, that the failure to make a Change of Recommendation or terminate the Merger Agreement, as applicable, would be reasonably likely to violate its fiduciary or statutory duties under applicable law. For more information, please see the section of this proxy statement entitled “The Merger Agreement — The Board of Directors’ Recommendation; Change of Recommendation.”
The termination of the Merger Agreement by Capri in connection with the Board of Directors’ authorization for Capri to enter into a definitive agreement to consummate an alternative transaction contemplated by a Superior Proposal will result in the payment by Capri of a termination fee of $240 million. For more information, please see the section of this proxy statement entitled “The Merger Agreement — Termination Fee Payable by Capri.”
Termination of the Merger Agreement (see page 74)
In addition to the circumstances described above, Tapestry and Capri have certain rights to terminate the Merger Agreement under customary circumstances, including (i) by mutual agreement, (ii) if any governmental entity with competent jurisdiction over Tapestry or Capri has issued a final and non-appealable injunction or similar order
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or any law that prohibits or makes illegal the consummation of the Merger and the other transactions contemplated by the Merger Agreement, (iii) in the event of an uncured breach in any material respect of the Merger Agreement by the other party, (iv) if the Merger has not been consummated on or before August 10, 2024 (which we refer to as the “Outside Date”, and which may be extended to November 10, 2024 and February 10, 2025 under certain circumstances) or (v) if Capri shareholders fail to adopt the Merger Agreement at the Special Meeting (or any adjournment or postponement thereof). Under certain circumstances, (a) Capri is required to pay Tapestry a termination fee equal to $240 million and (b) Tapestry is required to pay Capri its reasonable fees and expenses, subject to a specified cap. For more information, please see the sections of this proxy statement entitled “The Merger Agreement — Termination of the Merger Agreement,” “The Merger Agreement — Termination Fee Payable by Capri” and “The Merger Agreement — Fees Payable by Tapestry.”
Effect on Capri if the Merger Is Not Completed (see page 22)
If the Merger Agreement is not adopted by Capri shareholders, or if the Merger is not completed for any other reason:
Capri shareholders will not be entitled to, nor will they receive, any payment for their respective Capri ordinary shares pursuant to the Merger Agreement;
(a) Capri will remain an independent public company; (b) Capri ordinary shares will continue to be listed and traded on the NYSE and registered under the Exchange Act; and (c) Capri will continue to file periodic and other reports with the SEC; and
under certain specified circumstances described in the section of this proxy statement entitled “The Merger Agreement — Termination Fee Payable by Capri,” Capri will be required to pay Tapestry a termination fee of $240 million.
For more information, please see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Effect on Capri if the Merger Is Not Completed.”
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QUESTIONS AND ANSWERS
The following questions and answers address some commonly asked questions regarding the Merger, the Merger Agreement and the Special Meeting. These questions and answers may not address all questions that are important to you. You should carefully read and consider the more detailed information contained elsewhere in this proxy statement and the annexes to this proxy statement, including the Merger Agreement, along with all of the documents we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions in the section of this proxy statement entitled “Where You Can Find More Information.”
Q:
Why am I receiving these materials?
A:
This document is being delivered to you because you are a shareholder of Capri as of the Record Date of [  ], 2023. The Board of Directors is furnishing this proxy statement and form of proxy card to the Capri shareholders in connection with the solicitation of proxies to be voted at the Special Meeting.
Q:
When and where is the Special Meeting?
A:
The Special Meeting is scheduled to be held virtually via live webcast on [  ], 2023, at [  ] (unless the Special Meeting is adjourned or postponed). There will not be a physical meeting location. We believe a virtual-only meeting format facilitates shareholder attendance and participation by enabling all shareholders to participate fully, equally and without additional cost, using an Internet-connected device from any location around the world. In addition, the virtual-only meeting format increases our ability to engage with all shareholders, regardless of size, resources or physical location.
Capri shareholders will be able to virtually attend and vote at the Special Meeting by visiting www.virtualshareholdermeeting.com/CPRI2023SM, which we refer to as the “Special Meeting website.” On the day of the Special Meeting, you can log in to the Special Meeting with the control number included on your proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials, as applicable. We recommend that you log in to our virtual meeting platform at least 15 minutes before the scheduled start time of the Special Meeting to ensure that you can access the meeting. If you encounter any technical difficulties with the virtual meeting during the log in or meeting time, please call the technical support number that will be posted on the virtual meeting log in page. Rules governing the conduct of the Special Meeting will be posted on the virtual meeting platform along with an agenda.
Q:
What am I being asked to vote on at the Special Meeting?
A:
You are being asked to vote on the following proposals:
to adopt the Merger Agreement Proposal;
to approve, on an advisory (nonbinding) basis, the Compensation Proposal; and
to approve the Adjournment Proposal.
Q:
Who is entitled to vote at the Special Meeting?
A:
Capri shareholders as of the Record Date of [  ], 2023 are entitled to notice of the Special Meeting and to vote at the Special Meeting. Each holder of Capri ordinary shares shall be entitled to cast one vote on each matter properly brought before the Special Meeting for each such ordinary share owned at the close of business on the Record Date. Virtual attendance at the Special Meeting via the Special Meeting website is not required to vote.
Q:
How does the Merger Consideration compare to the market price of Capri ordinary shares prior to the announcement of the Merger Agreement?
A:
The Merger Consideration of $57.00 per share represents a premium of approximately 59% to Capri’s 30-day volume-weighted average share price ending August 9, 2023, the last full trading day prior to the announcement of the entry into the Merger Agreement. The closing price of Capri ordinary shares on the NYSE on [  ], 2023, the most recent practicable date prior to the date of this proxy statement, was $[  ]. You are encouraged to obtain current market prices of Capri ordinary shares in connection with voting your Capri ordinary shares.
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Q:
May I attend and vote at the Special Meeting?
A:
All Capri shareholders as of the Record Date may attend and vote at the Special Meeting.
Shares held directly in your name as a Capri shareholder of record may be voted at the Special Meeting via the Special Meeting website. Shares held in “street name” may be voted at the Special Meeting via the Special Meeting website only if you obtain a legal proxy from your bank, broker or other nominee.
Even if you plan to attend the virtual Special Meeting, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”) so that your vote will be counted if you later decide not to or become unable to virtually attend the Special Meeting. If you attend the Special Meeting and vote thereat, your vote will revoke any proxy previously submitted.
Q:
What will I receive if the Merger is completed?
A:
Upon completion of the Merger, you will be entitled to receive the Merger Consideration of $57.00 in cash, without interest, for each Capri ordinary share that you own (other than any Dissenting Shares or Cancelled Shares) immediately prior to the Effective Time, subject to any required tax withholding. For example, if you own 100 Capri ordinary shares, you will receive $5,700 in cash in exchange for your Capri ordinary shares (other than any Dissenting Shares or Cancelled Shares), without interest and less any applicable tax withholding. Dissenting Shares means shares held by a shareholder who properly provides a written objection, properly provides written notice of his or her election to dissent, and does not withdraw or lose, its dissenters’ rights in accordance with Section 179 of the BVI Act and otherwise complies with all provisions of the BVI Act relevant to the exercise and perfection of dissenters’ rights. Cancelled Shares means shares that are owned or held in treasury by Capri or are owned by Tapestry or any of its direct or indirect subsidiaries, which will be cancelled and will cease to exist.
Q:
What are the material U.S. federal income tax consequences of the Merger to holders of Capri ordinary shares?
A:
The exchange of Capri ordinary shares for cash pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. Accordingly, a U.S. Holder (as defined in the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Material U.S. Federal Income Tax Consequences of the Merger”) who exchanges Capri ordinary shares for cash in the Merger generally will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of cash that such U.S. Holder receives in the Merger and (ii) such U.S. Holder’s adjusted tax basis in the Capri ordinary shares exchanged therefor.
For more information, please see the section of this proxy statement entitled “Proposal 1: Adoption of the Merger Agreement — Material U.S. Federal Income Tax Consequences of the Merger.” This proxy statement contains a general discussion of certain material U.S. federal income tax consequences of the Merger. You should consult your tax advisor to determine the particular tax consequences to you of the Merger in light of your particular circumstances (including the application and effect of any state, local or foreign income and other tax laws).
Q:
What vote is required to approve the Merger Agreement Proposal, the Compensation Proposal and the Adjournment Proposal?
A:
The affirmative vote of the holders of a majority of the outstanding Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote thereon is required to adopt the resolution authorizing the Merger Agreement. The affirmative vote of a majority of the votes of the Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote on the Compensation Proposal is required to approve the Compensation Proposal. The affirmative vote of a majority of the votes of the Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote on the Adjournment Proposal is required for approval of the Adjournment Proposal.
If a quorum is present at the Special Meeting, the failure of any Capri shareholder of record to: (a) submit a signed proxy card; (b) grant a proxy over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”); or (c) attend the Special Meeting will have the same effect as a vote “AGAINST” the Merger Agreement Proposal but, assuming a
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quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal. If a quorum is present at the Special Meeting, abstentions will have the same effect as a vote “AGAINST” the Merger Agreement Proposal, the Compensation Proposal and the Adjournment Proposal. If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Q:
What constitutes a quorum?
A:
Not less than 50 percent of the votes of the Capri ordinary shares outstanding and entitled to vote on resolutions of members present virtually or represented by proxy will constitute a quorum at the Special Meeting. Because there were [  ] Capri ordinary shares outstanding and entitled to vote as of the Record Date, we will need holders of at least [  ] shares present virtually or represented by proxy at the Special Meeting to achieve a quorum.
Q:
What happens if the Merger is not completed?
A:
If the Merger Agreement is not authorized by Capri shareholders or if the Merger is not completed for any other reason, Capri shareholders will not receive any payment for their Capri ordinary shares. Instead, Capri will remain an independent public company, Capri ordinary shares will continue to be listed and traded on the NYSE and registered under the Exchange Act, and Capri will continue to file periodic and other reports with the SEC.
Under specified circumstances, Capri will be required to pay Tapestry a termination fee of $240 million upon the termination of the Merger Agreement, as described in the section of this proxy statement entitled “The Merger Agreement — Termination Fee Payable by Capri.”
Q:
Why are Capri shareholders being asked to cast an advisory (nonbinding) vote to approve the Compensation Proposal?
A:
The Exchange Act and applicable SEC rules thereunder require Capri to seek an advisory (nonbinding) vote with respect to certain payments that could become payable to its named executive officers in connection with the Merger.
Q:
What will happen if Capri shareholders do not approve the Compensation Proposal at the Special Meeting?
A:
Approval of the Compensation Proposal is not a condition to the completion of the Merger and is separate and apart from the Merger Agreement Proposal. Accordingly, a Capri shareholder may vote to approve the Merger Agreement Proposal and vote not to approve the Compensation Proposal, or vice versa. The vote with respect to the Compensation Proposal is an advisory vote and will not be binding on Capri. Therefore, if the approval of the Merger Agreement Proposal is obtained and the Merger is completed, the amounts payable under the Compensation Proposal will continue to be payable to Capri’s named executive officers in accordance with the terms and conditions of the applicable agreements regardless of whether the Compensation Proposal is approved.
Q:
What do I need to do now?
A:
You should carefully read and consider this entire proxy statement and the annexes to this proxy statement, including the Merger Agreement, along with all of the documents that we refer to in this proxy statement, as they contain important information about, among other things, the Merger and how it affects you. Then sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying prepaid reply envelope, or grant your proxy electronically over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”), so that your shares can be voted at the Special Meeting. If you hold your shares in “street name,” please refer to the voting instruction form provided by your bank, broker or other nominee to vote your shares.
Q:
Should I surrender my certificates or book-entry shares now?
A:
No. After the Merger is completed, the Exchange Agent (as defined in the section of this proxy statement entitled “The Merger Agreement — Exchange and Payment Procedures”) will, within two business days following the Effective Time, mail to each holder of record of certificates representing Capri ordinary shares, whose shares were converted into the right to receive the Merger Consideration, (A) a letter of transmittal and (B) instructions
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that explain how to surrender certificates of Capri ordinary shares in exchange for the Merger Consideration. If you hold book-entry shares, Tapestry will cause the applicable Merger Consideration to be paid directly to the person in whose name such book-entry shares are registered.
Q:
What happens if I sell or otherwise transfer my Capri ordinary shares after the Record Date but before the Special Meeting?
A:
The Record Date for the Special Meeting is earlier than the date of the Special Meeting and the date the Merger is expected to be completed. If you sell or transfer your Capri ordinary shares after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or otherwise transfer your shares and each of you notifies Capri in writing of such special arrangements, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares, but you will retain your right to vote those shares at the Special Meeting. Even if you sell or otherwise transfer your Capri ordinary shares after the Record Date, we encourage you to sign, date and return the enclosed proxy card in the accompanying prepaid reply envelope or grant your proxy electronically over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”).
Q:
What is the difference between holding shares as a Capri shareholder of record and holding shares in “street name” as a beneficial owner?
A:
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, you are considered to be the “shareholder of record” with respect to those shares. In this case, this proxy statement and your proxy card have been sent directly to you by Capri.
If your shares are held through a bank, broker or other nominee, you are considered the “beneficial owner” of Capri ordinary shares held in “street name.” In that case, this proxy statement has been forwarded to you by your bank, broker or other nominee who is considered, with respect to those shares, to be the Capri shareholder of record. As the beneficial owner, you have the right to vote on the Internet, by telephone or, if you received a paper copy of the proxy materials, by completing, signing and mailing the proxy card enclosed therewith in the postage-prepaid envelope provided for that purpose.
Q:
How may I vote?
A:
If you are a Capri shareholder of record (that is, if your Capri ordinary shares are registered in your name with American Stock Transfer & Trust Company, our transfer agent), there are four ways to vote:
Internet: Vote at www.virtualshareholdermeeting.com/CPRI2023SM in advance of the Special Meeting. The Internet voting system is available 24 hours a day until 11:59 p.m. Eastern Time on [  ], 2023. Once you enter the Internet voting system, you can record and confirm (or change) your voting instructions.
Telephone: Use the telephone number shown on your proxy card. The telephone voting system is available 24 hours a day in the United States until 11:59 p.m. Eastern Time on [  ], 2023. Once you enter the telephone voting system, a series of prompts will tell you how to record and confirm (or change) your voting instructions.
Mail: Mark your voting instructions on the card and sign, date and return it in the postage-paid envelope provided. For your mailed proxy card to be counted, we must receive it before [  ] on [  ], 2023.
At the Special Meeting: Shares held directly in your name as a Capri shareholder of record may be voted at the Special Meeting via the Special Meeting website. Shares held in “street name” may be voted at the Special Meeting via the Special Meeting website only if you obtain a legal proxy from your bank, broker or other nominee.
If your Capri ordinary shares are held in “street name” by a bank, broker or other nominee, the holder of your shares will provide you with a copy of this proxy statement, a voting instruction form and directions on how to provide voting instructions. These directions may allow you to vote over the Internet or by telephone.
Whether or not you plan to attend the virtual Special Meeting, we urge you to vote in advance by proxy to ensure your vote is counted. We encourage you to submit your proxy over the Internet or by telephone, both of which are convenient, cost-effective and reliable alternatives to returning a proxy card by mail. You may still attend the Special Meeting and vote thereat if you have already voted by proxy.
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Please be aware that, although there is no charge for voting your shares, if you vote electronically over the Internet by visiting the address on your proxy card or by telephone by calling the phone number on your proxy card, in each case, you may incur costs such as Internet access and telephone charges for which you will be responsible.
Q:
What is a proxy?
A:
A proxy is a Capri shareholder’s legal designation of another person to vote shares owned by such Capri shareholder on their behalf. If you are a Capri shareholder of record, or beneficially in street name, you can vote by proxy over the Internet, by telephone or by mail by following the instructions provided in the enclosed proxy card. If you hold shares beneficially in “street name,” you should follow the voting instructions provided by your bank, broker or other nominee.
Q:
If a Capri shareholder gives a proxy, how are the shares voted?
A:
Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, or your proxies, will vote your shares in the way that you indicate. When completing the Internet or telephone process or the proxy card, you may specify whether your shares should be voted for or against or to abstain from voting on all, some or none of the specific items of business to come before the Special Meeting.
If you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Q:
If my broker holds my shares in “street name,” will my broker vote my shares for me?
A:
No. Your bank, broker or other nominee is permitted to vote your shares on any proposal currently scheduled to be considered at the Special Meeting only if you instruct your bank, broker or other nominee how to vote. You should follow the procedures provided by your bank, broker or other nominee to vote your shares. Without instructions, your shares will not be voted on such proposals, which will have the same effect as if you voted against the Merger Agreement Proposal but, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal.
Q:
May I change my vote after I have mailed my signed and dated proxy card?
A:
Yes. You can change or revoke your proxy before the Special Meeting in the manner described in this proxy statement. If you are the record holder of your shares, you may change or revoke your proxy by any of the following actions:
Notifying our Corporate Secretary in writing at 90 Whitfield Street, 2nd Floor, London, United Kingdom W1T 4EZ;
Signing and returning a later dated proxy card;
Submitting a new proxy electronically via the Internet or by telephone; or
Voting at the Special Meeting. Please note that virtual attendance at the Special Meeting will not by itself constitute revocation of a proxy.
Any change to your proxy that is provided by telephone or the Internet must be submitted by 11:59 p.m. Eastern Time on [  ], 2023.
If you hold your Capri ordinary shares in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote.
If you have any questions about how to vote or change your vote, you should contact our proxy solicitor:
INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free: (877) 800-5195
Banks and brokers may call collect: (212) 750-5833
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Q:
What should I do if I receive more than one set of voting materials?
A:
This means you own Capri ordinary shares that are registered under different names or are in more than one account. For example, you may own some shares directly as a Capri shareholder of record and other shares through a broker, or you may own shares through more than one broker. In these situations, you will receive multiple sets of proxy materials. You must vote, sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the proxy cards that you receive in order to vote all of the shares you own. Each proxy card you receive comes with its own prepaid return envelope. If you submit your proxy by mail, make sure you return each proxy card in the return envelope that accompanies that proxy card.
Q:
How many copies of this proxy statement and related voting materials should I receive if I share an address with another Capri shareholder?
A:
The SEC’s proxy rules permit companies and intermediaries, such as brokers, to satisfy delivery requirements for proxy statements with respect to two or more Capri shareholders sharing the same address by delivering a single proxy statement to those Capri shareholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for Capri shareholders and cost savings for companies.
Capri and some brokers may be householding our proxy materials by delivering a single set of proxy materials to multiple Capri shareholders who request a copy and share an address, unless contrary instructions have been received from the affected Capri shareholders. If at any time you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if your household is receiving multiple copies of these documents and you wish to request that future deliveries be limited to a single copy, please notify our investor relations department by emailing investorrelations@capriholdings.com or calling (201) 514-8234, or you may also contact your broker or other nominee record holder.
Q:
Where can I find the voting results of the Special Meeting?
A:
The preliminary voting results for the Special Meeting are expected to be announced at the Special Meeting. In addition, within four business days following certification of the final voting results, Capri will file the final voting results of the Special Meeting (or, if the final voting results have not yet been certified, the preliminary results) with the SEC on a Current Report on Form 8-K.
Q:
Who will solicit and pay the cost of soliciting proxies?
A:
Capri has engaged Innisfree M&A Incorporated, which we refer to as “Innisfree,” to assist in the solicitation of proxies for the Special Meeting. Capri estimates that it will pay Innisfree a fee of up to $30,000, plus reimbursement for certain out-of-pocket fees, telephone charges and expenses. Capri has agreed to indemnify Innisfree against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).
Capri also may reimburse banks, brokers and other custodians, nominees and fiduciaries or their respective agents for their expenses in forwarding proxy materials to beneficial owners of Capri ordinary shares. Capri directors, officers and employees also may solicit proxies by telephone, by electronic means or in person. They will not be paid any additional amounts for soliciting proxies.
Q:
When do you expect the Merger to be completed?
A:
We currently expect the Merger to be completed in calendar year 2024. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to the closing conditions specified in the Merger Agreement and summarized in this proxy statement, many of which are outside of our control.
Q:
How can I obtain additional information about Capri?
A:
Capri will provide copies of this proxy statement, documents incorporated by reference and its Annual Report on Form 10-K for the fiscal year ended April 1, 2023 (which we refer to as the “Annual Report”), without charge to any Capri shareholder who makes a request in writing to our Corporate Secretary at 90 Whitfield Street, 2nd Floor, London, United Kingdom, W1T 4EZ. In order for you to receive timely delivery of documents in advance of the Special Meeting, you must make such request by no later than [  ], 2023. Capri’s Annual Report and other SEC
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filings may also be accessed at https://sec.gov or on Capri’s website at www.capriholdings.com. Capri’s website address is provided as an inactive textual reference only. The information provided on or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to our website provided in this proxy statement.
Q:
Who can help answer my questions?
A:
If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your Capri ordinary shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free: (877) 800-5195
Banks and brokers may call collect: (212) 750-5833
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FORWARD-LOOKING STATEMENTS
This communication contains statements which are, or may be deemed to be, “forward-looking statements.” Forward-looking statements are prospective in nature and are not based on historical facts, but rather on current expectations and projections of Capri management about future events and are therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results expressed or implied by the forward-looking statements. All statements, other than statements of historical facts included herein, may be forward-looking statements. Without limitation, any statements preceded or followed by or that include the words “plans”, “believes”, “expects”, “intends”, “will”, “should”, “could”, “would”, “may”, “anticipates”, “might” or similar words or phrases are forward-looking statements. Such forward-looking statements involve known and unknown risks and uncertainties that could significantly affect expected results and are based on certain key assumptions, which could cause actual results to differ materially from those projected or implied in any forward-looking statements, including regarding the proposed transaction. These risks, uncertainties and other factors include:
changes in consumer traffic and retail trends;
high consumer debt levels, recession and inflationary pressures;
impact of industry competition;
the impact of the COVID-19 pandemic;
levels of cash flow and future availability of credit;
compliance with restrictive covenants under Capri’s credit agreement;
Capri’s ability to integrate successfully and to achieve anticipated benefits of any acquisition and to successfully execute our strategic initiatives;
the risk of disruptions to Capri’s businesses;
risks associated with operating in international markets and our global sourcing activities, including disruptions or delays in manufacturing or shipments;
the risk of cybersecurity threats and privacy of data security breaches;
the negative effects of events on the market price of Capri’s ordinary shares and our operating results;
unknown liabilities;
the risk of litigation and/or regulatory actions related to Capri’s businesses and adverse outcomes in litigation;
fluctuations in demand for Capri’s products;
levels of indebtedness (including the indebtedness incurred in connection with acquisitions);
the level of other investing activities and uses of cash;
fluctuations in the capital markets;
fluctuations in interest and exchange rates;
the occurrence of unforeseen epidemics and pandemics, disasters or catastrophes; extreme weather conditions and natural disasters;
general, local and global economic, political, business and market conditions including acts of war and other geopolitical conflicts;
the timing, receipt and terms and conditions of required governmental and regulatory approvals for the Merger that could delay or result in the termination of the Merger;
the occurrence of any other event, change or other circumstances that could give rise to the termination of the Merger Agreement;
the possibility that our shareholders may not approve the Merger;
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the risk that the parties to the Merger Agreement may not be able to satisfy the conditions to the Merger in a timely manner or at all;
the risk that any announcements relating to the Merger could have adverse effects on the market price of Capri’s ordinary shares;
the risk of any unexpected costs or expenses resulting from the Merger;
the risk of any litigation relating to the Merger;
the risk that the Merger and its announcement could have an adverse effect on the ability of Capri to retain customers and retain and hire key personnel and maintain relationships with customers, suppliers, employees, shareholders and other business relationships and on its operating results and business generally;
the risk the pending Merger could divert the attention of Capri’s management; and
other risk factors as detailed from time to time in Capri’s reports filed with the SEC.
For additional information concerning factors that could cause actual results and events to differ materially from those projected herein, please refer to Capri’s disclosure filings and materials, which you can find on www.capriholdings.com, such as its Form 10-K, Form 10-Q and Form 8-K reports that have been filed with the SEC. Please consult these documents for a more complete understanding of these risks and uncertainties. Any forward-looking statement in this proxy statement speaks only as of the date made and Capri disclaims any obligation to update or revise any forward-looking or other statements contained herein other than in accordance with legal and regulatory obligations.
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THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of the Board of Directors for use at the Special Meeting.
Date, Time and Place
The Special Meeting will be held virtually via live webcast on [ ], 2023, beginning at [ ] (unless the Special Meeting is adjourned or postponed). Capri shareholders will be able to virtually attend and vote at the Special Meeting by visiting www.virtualshareholdermeeting.com/CPRI2023SM, which we refer to as the “Special Meeting website.”
Purpose of the Special Meeting
At the Special Meeting, we will ask Capri shareholders to vote on proposals to: (a) adopt the Merger Agreement Proposal; (b) approve, on an advisory (nonbinding) basis, the Compensation Proposal; and (c) approve the Adjournment Proposal.
Record Date; Shares Entitled to Vote; Quorum
Only Capri shareholders as of the Record Date are entitled to notice of the Special Meeting and to vote at the Special Meeting. As of the Record Date, there were [ ] Capri ordinary shares outstanding and entitled to vote at the Special Meeting.
The presence, virtually or represented by proxy, of not less than 50 percent of the votes of the Capri ordinary shares entitled to vote on resolutions of members to be considered at the Special Meeting will constitute a quorum at the Special Meeting. In the event that a quorum is not present at the Special Meeting, it is expected that the Special Meeting will be adjourned to solicit additional proxies.
Vote Required; Abstentions and Broker Non-Votes
Each Capri shareholder shall be entitled to one vote for each Capri ordinary share owned at the close of business on the Record Date.
The affirmative vote of the holders of a majority of the outstanding Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote thereon is required to approve the Merger Agreement Proposal. As of the Record Date, [ ] votes constitute a majority of the outstanding Capri ordinary shares. Adoption of the Merger Agreement by Capri shareholders is a condition to the consummation of the Merger.
The affirmative vote of a majority of the votes of the Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote on the Compensation Proposal is required to approve, on an advisory (nonbinding) basis, the Compensation Proposal.
The affirmative vote of a majority of the votes of the Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote on the Adjournment Proposal is required for approval of the Adjournment Proposal.
The failure of any Capri shareholder of record to: (a) submit a signed proxy card; (b) grant a proxy over the Internet or by telephone (in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting”); or (c) attend the Special Meeting will have the same effect as a vote “AGAINST” the Merger Agreement Proposal but, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal. If a quorum is present at the Special Meeting, for Capri shareholders who attend the Special Meeting or are represented by proxy and abstain from voting, the abstention will have the same effect as if the Capri shareholder voted “AGAINST” the Merger Agreement Proposal, the Compensation Proposal and the Adjournment Proposal.
Each “broker non-vote” will also count as a vote “AGAINST” the Merger Agreement Proposal but, assuming a quorum is present, will have no effect on the Compensation Proposal or the Adjournment Proposal. A so-called “broker non-vote” results when banks, brokers and other nominees return a valid proxy voting upon a matter or matters for which the applicable rules provide discretionary authority but do not vote on a particular proposal because they do not have discretionary authority to vote on the matter and have not received specific voting instructions from the beneficial owner of such shares. Capri does not expect any broker non-votes at the Special Meeting because
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the rules applicable to banks, brokers and other nominees only provide brokers with discretionary authority to vote on proposals that are considered “routine,” whereas each of the proposals to be presented at the Special Meeting is considered “non-routine.” As a result, no broker will be permitted to vote your Capri ordinary shares at the Special Meeting without receiving instructions. Failure to instruct your broker on how to vote your shares will have the same effect as a vote “AGAINST” the Merger Agreement Proposal.
Share Ownership and Interests of Certain Persons
Shares Held by Capri’s Directors and Executive Officers
As of the Record Date, our executive officers and directors beneficially owned and were entitled to vote, in the aggregate, [ ] Capri ordinary shares, representing approximately [ ]% of the Capri ordinary shares outstanding on the Record Date. We currently expect that our executive officers and directors will vote all of their respective Capri ordinary shares (1) “FOR” the Merger Agreement Proposal, (2) “FOR” the Compensation Proposal and (3) “FOR” the Adjournment Proposal, although none of them have entered into any agreements obligating them to do so.
Voting at the Special Meeting
You can vote at the virtual Special Meeting, which will be held on [ ], 2023, at [ ] at www.virtualshareholdermeeting.com/CPRI2023SM (unless the Special Meeting is adjourned or postponed).
You may also authorize the persons named as proxies on the proxy card to vote your shares by returning the proxy card in advance by mail, over the Internet or by telephone. Although Capri offers multiple voting methods, Capri encourages you to vote over the Internet or by phone as Capri believes they are the most cost-effective methods. We also recommend that you vote as soon as possible, even if you are planning to attend the Special Meeting, so that the vote count will not be delayed. Both the Internet and the telephone provide convenient, cost-effective and reliable alternatives to returning your proxy card by mail. If you choose to vote your shares over the Internet or by telephone, there is no need for you to submit your proxy card by mail.
To Vote Over the Internet:
Vote at [ ] in advance of the Special Meeting. The Internet voting system is available 24 hours per day until 11:59 p.m. Eastern Time on [ ], 2023. Once you enter the Internet voting system, you can record and confirm (or change) your voting instructions.
To Vote by Telephone:
Use the telephone number shown on your proxy card. The telephone voting system is available 24 hours per day in the United States until 11:59 p.m. Eastern Time on [ ], 2023. Once you enter the telephone voting system, a series of prompts will tell you how to record and confirm (or change) your voting instructions.
To Vote by Proxy Card:
If you received a proxy card, mark your voting instructions on the card and sign, date and return it in the postage-paid envelope provided. For your mailed proxy card to be counted, we must receive it before 11:59 p.m. Eastern Time on [ ], 2023.
All shares represented by properly signed and dated proxies received by the deadline indicated above will be voted at the Special Meeting in accordance with the instructions of the Capri shareholder. Properly signed and dated proxies that do not contain voting instructions will be voted: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal. If you indicate on your proxy card that you wish to vote in favor of the Merger Agreement Proposal but do not indicate a choice on the Adjournment Proposal or the Compensation Proposal on an advisory (nonbinding) basis, your Capri ordinary shares will be voted “FOR” each such proposal. Proxy cards that are returned without a signature will not be counted as present at the Special Meeting and cannot be voted.
If your shares are held in “street name” through a bank, broker or other nominee, you may vote through your bank, broker or other nominee by completing and returning the voting form provided by your bank, broker or other nominee or attending the Special Meeting and voting using your control number, or, if you did not obtain a control number, contacting your bank, broker or other nominee to obtain a control number so that you may vote. If such a
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service is provided, you may vote over the Internet or telephone through your bank, broker or other nominee by following the instructions on the voting form provided by your bank, broker or other nominee. If you do not return your bank’s, broker’s or other nominee’s voting form, do not vote via the Internet or telephone through your bank, broker or other nominee, if possible, or do not attend the Special Meeting and vote thereat, it will have the same effect as if you voted “AGAINST” the Merger Agreement Proposal but, assuming a quorum is present, will not have any effect on the Compensation Proposal or the Adjournment Proposal (so long as you do not attend the Special Meeting and abstain from voting on any given proposal, which would have the same effect as voting “AGAINST” the Merger Agreement Proposal, the Compensation Proposal and/or the Adjournment Proposal, as applicable).
Revocability of Proxies
Any proxy given by a Capri shareholder may be revoked before the Special Meeting by doing any of the following:
if a proxy was submitted by telephone or over the Internet, by submitting another proxy by telephone or over the Internet, in accordance with the instructions detailed in the section of this proxy statement entitled “The Special Meeting — Voting at the Special Meeting” at any time before the closing of the voting facilities at 11:59 p.m. Eastern Time on [ ], 2023;
by submitting a properly signed and dated proxy card with a date later than the date of the previously submitted proxy relating to the same Capri ordinary shares, provided such proxy card is received no later than the close of business on [ ], 2023;
by delivering a signed written notice of revocation bearing a date later than the date of the proxy to Capri’s Corporate Secretary at 90 Whitfield Street, 2nd Floor, London, United Kingdom W1T 4EZ, stating that the proxy is revoked, provided such written notice is received no later than the close of business on [ ], 2023; or
by attending the virtual Special Meeting and voting thereat (your attendance at the virtual Special Meeting will not, by itself, revoke your proxy).
If you hold your Capri ordinary shares in “street name,” you should contact your bank, broker or other nominee for instructions regarding how to change your vote. You may also vote at the virtual Special Meeting with your control number, or, if you did not obtain a control number, by contacting your bank, broker or other nominee to obtain a control number.
Any adjournment, postponement or other delay of the Special Meeting, including for the purpose of soliciting additional proxies, will allow Capri shareholders who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting as adjourned, postponed or delayed.
Board of Directors’ Recommendation
The Board of Directors has unanimously: (a) determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (b) recommended that the shareholders of Capri adopt a resolution authorizing the Merger Agreement and the Plan of Merger and approve the Merger and the other transactions contemplated by the Merger Agreement, and (c) resolved to submit such matters for approval by Capri shareholders at the Special Meeting.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the Merger Agreement Proposal; (2) “FOR” the Compensation Proposal; and (3) “FOR” the Adjournment Proposal.
Solicitation of Proxies
The Board of Directors is soliciting your proxy, and Capri will bear the cost of soliciting proxies. Innisfree has been retained to assist with the solicitation of proxies. Innisfree will be paid up to $30,000 and will be reimbursed for its reasonable out-of-pocket fees, telephone charges and expenses for these and other advisory services in connection with the Special Meeting. Forms of proxies and proxy materials may also be distributed through brokers, custodians and other like parties to the beneficial owners of Capri ordinary shares, in which case these parties will be reimbursed for their reasonable out-of-pocket expenses in accordance with SEC and NYSE regulations. Proxies may also be solicited in person or by telephone, facsimile, electronic mail or other electronic medium by Capri or, without additional compensation, by Capri’s directors, officers and employees.
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Anticipated Date of Completion of the Merger
Assuming timely satisfaction of necessary closing conditions, including the approval by Capri shareholders of the Merger Agreement Proposal, we currently anticipate that the Merger will be consummated in calendar year 2024.
Delisting and Deregistration of Capri Ordinary Shares
If the Merger is completed, the Capri ordinary shares will be delisted from the NYSE and deregistered under the Exchange Act, and Capri ordinary shares will no longer be publicly traded.
Householding of Special Meeting Materials
Unless we have received contrary instructions, we may send a single copy of this proxy statement to any household at which two or more Capri shareholders reside if we believe the shareholders are members of the same family. Each Capri shareholder in the household will continue to receive a separate proxy card. This process, known as “householding,” reduces the volume of duplicate information received at your household and helps to reduce our expenses.
If you would like to receive your own set of our disclosure documents, please contact us using the instructions set forth below. Similarly, if you share an address with another Capri shareholder and together both of you would like to receive only a single set of our disclosure documents, please contact us using the instructions set forth below.
If you are a Capri shareholder of record, you may contact us by writing to our Corporate Secretary at 90 Whitfield Street, 2nd Floor, London, United Kingdom W1T 4EZ or by calling our proxy solicitor, Innisfree, at (877) 800-5195. Eligible shareholders of record receiving multiple copies of this proxy statement can request householding by contacting us in the same manner. If a bank, broker or other nominee holds your shares, please contact your bank, broker or other nominee directly.
Questions and Additional Information
If you have any questions concerning the Merger, the Special Meeting or this proxy statement, would like additional copies of this proxy statement or need help voting your Capri ordinary shares, please contact our proxy solicitor:
INNISFREE M&A INCORPORATED

501 Madison Avenue, 20th Floor
New York, New York 10022
Shareholders may call toll-free: (877) 800-5195
Banks and brokers may call collect: (212) 750-5833
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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because it contains important information about the Merger and how it affects you.
Parties Involved in the Merger
Capri Holdings Limited
90 Whitfield Street, 2nd Floor,
London, United Kingdom
W1T 4EZ
Capri is a global fashion luxury group consisting of iconic, founder-led brands Versace, Jimmy Choo and Michael Kors. Our commitment to glamorous style and craftsmanship is at the heart of each of our luxury brands. We have built our reputation on designing exceptional, innovative products that cover the full spectrum of fashion luxury categories. Our strength lies in the unique DNA and heritage of each of our brands, the diversity and passion of our people and our dedication to the clients and communities we serve. Capri ordinary shares are listed on the NYSE under the symbol “CPRI.”
Tapestry, Inc.
10 Hudson Yards
New York, New York 10001
Tapestry, a Maryland corporation, is a global house of brands that unites the magic of Coach, kate spade new york and Stuart Weitzman. Each of Tapestry’s brands are unique and independent, while sharing a commitment to innovation and authenticity defined by distinctive products and differentiated customer experiences across channels and geographies. Tapestry uses its collective strengths to move its customers and empower its communities, to make the fashion industry more sustainable, and to build a company that’s equitable, inclusive, and diverse. Tapestry’s common stock is listed on the NYSE under the symbol “TPR.”
Sunrise Merger Sub, Inc.
c/o Tapestry, Inc.
10 Hudson Yards
New York, New York 10001
Merger Sub is a British Virgin Islands business company limited by shares with BVI company number 2129509 and a wholly owned subsidiary of Tapestry that was formed solely for the purposes of entering into the Merger Agreement and related agreements and consummating the transactions contemplated thereby. Merger Sub has not engaged in any business activities to date other than in connection with the transactions contemplated by the Merger Agreement. Pursuant to the Merger Agreement, at the Effective Time, Merger Sub will merge with and into Capri and will cease to exist.
Effect of the Merger
On the terms and subject to the conditions of the Merger Agreement at the Effective Time, Merger Sub will merge with and into Capri, the separate corporate existence of Merger Sub will cease and Capri will continue as the Surviving Company. As a result of the Merger, Capri will become a wholly owned subsidiary of Tapestry, and Capri ordinary shares will no longer be publicly traded and will be delisted from the NYSE. In addition, Capri ordinary shares will be deregistered under the Exchange Act, and Capri will no longer file periodic or other reports with the SEC. If the Merger is completed, you will not own any shares of the Surviving Company.
The Effective Time will occur at such time as the articles of merger with respect to the Merger have been duly registered by the Registrar of Corporate Affairs of the British Virgin Islands or at such other date or time as may be agreed by Capri and Tapestry and specified in the articles of merger.
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Effect on Capri if the Merger Is Not Completed
If the Merger Agreement is not adopted by Capri shareholders, or if the Merger is not completed for any other reason:
Capri shareholders will not be entitled to, nor will they receive, any payment for their respective Capri ordinary shares pursuant to the Merger Agreement;
(a) Capri will remain an independent public company; (b) Capri ordinary shares will continue to be listed and traded on the NYSE and registered under the Exchange Act; and (c) Capri will continue to file periodic and other reports with the SEC; and
under certain specified circumstances, Capri will be required to pay Tapestry a termination fee of $240 million, upon the termination of the Merger Agreement, as described in the section of this proxy statement entitled “The Merger Agreement — Termination Fee Payable by Capri.”
Merger Consideration
Capri Ordinary Shares
At the Effective Time, by virtue of the Merger and without any action on the part of Capri, Tapestry, Merger Sub, or the holders of any securities of Capri or Merger Sub, each Capri ordinary share (other than any Dissenting Shares or Cancelled Shares) outstanding immediately prior to the Effective Time will be cancelled and the holder will have the right to receive the Merger Consideration of $57.00 in cash, without interest, less any applicable tax withholding.
After the Merger is completed, you will have the right to receive the Merger Consideration, subject to any required tax withholding, in respect of each Capri ordinary share that you own (other than any Dissenting Shares or Cancelled Shares) immediately prior to the Effective Time, but you will no longer have any rights as a Capri shareholder.
Treatment of Capri Equity Awards
Capri Options.
At the Effective Time, each Capri Option with a per share exercise price equal to or in excess of the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be converted automatically into a Tapestry Option to purchase the number of shares of Tapestry common stock equal to the product obtained by multiplying (x) the number of Capri ordinary shares subject to the Capri Option immediately prior to the Effective Time, by (y) the Conversion Ratio, with any fractional shares rounded down to the nearest whole share. Each Tapestry Option will have an exercise price per share of Tapestry common stock equal to (i) the per share exercise price for Capri ordinary shares subject to the corresponding Capri Option immediately prior to the Effective Time divided by (ii) the Conversion Ratio, rounded up to the nearest whole cent. Each Tapestry Option will otherwise be subject to the same terms and conditions applicable to the corresponding Capri Option under the applicable Capri equity plan and award agreements, including vesting terms and terms related to the treatment upon termination of employment.
At the Effective Time, each Capri Option with a per share exercise price that is less than the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be cancelled, with the holder of such Capri Option becoming entitled to receive an amount in cash equal to the product obtained by multiplying (i) the number of Capri ordinary shares subject to such Capri Option as of immediately prior to the Effective Time, by (ii) the excess of the Merger Consideration over the per share exercise price applicable to the Capri Option.
Capri RSUs.
At the Effective Time, (i) each Capri RSU that is outstanding immediately prior to the Effective Time and that is held by a non-employee director or named executive officer of Capri will vest as of the Effective Time and will be cancelled, with the holder of such Capri RSU becoming entitled to receive the Merger Consideration in respect of each Capri ordinary share subject to such Capri RSU immediately prior to the Effective Time, and (ii) each Capri RSU (other than any Capri RSU covered by the preceding clause (i)) that is outstanding immediately prior to the
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Effective Time will be converted automatically into a Tapestry RSU equal to the product obtained by multiplying (i) the total number of Capri ordinary shares subject to the Capri RSU immediately prior to the Effective Time by (ii) the Conversion Ratio, with any fractional shares rounded to the nearest whole share. Each Tapestry RSU shall otherwise be subject to the same terms and conditions applicable to the corresponding Capri RSU under the applicable Capri equity plan and award agreements, including vesting terms and terms related to the treatment upon termination of employment.
Capri PSUs.
At the Effective Time, each Capri PSU that is outstanding immediately prior to the Effective Time will fully vest and be cancelled in consideration for the right to receive the Merger Consideration with respect to the number of Capri ordinary shares equal to the number of Capri ordinary shares subject to such Capri PSU immediately prior to the Effective Time (with such number of Capri ordinary shares determined based on (i) actual performance as determined by the Compensation Committee for any fully completed measurement period or performance period, as applicable, ended prior to the Effective Time to the extent the Compensation Committee can reasonably determine the level of achievement of performance for such completed measurement period or performance period, as applicable, prior to the Effective Time, and (ii) target performance for any measurement period or performance period, as applicable, for which performance has not previously been determined).
Background of the Merger
The terms of the Merger are the result of arm’s-length negotiations between Capri and Tapestry. The following is a summary of the events leading up to the entry into the Merger Agreement and the key meetings, negotiations, discussions and actions between Capri and Tapestry and their respective advisors that preceded the public announcement of the Merger. Unless otherwise indicated, the dates referred to herein occurred in 2023.
From time to time, the Board of Directors, together with Capri’s senior management, has reviewed and evaluated Capri’s business strategies, opportunities and challenges as part of its consideration and evaluation of Capri’s prospects and ways to maximize shareholder value. These reviews and evaluations have focused on a diverse array of topics, including, among others, internal growth strategies, potential divestitures and separation transactions and potential acquisitions by Capri. The Board of Directors has also periodically reviewed with senior management and external advisors the global personal luxury goods industry, trends and landscape and discussed the possibility of an acquisition of Capri or one or more of its brands by a strategic or financial buyer. Nonetheless, except with respect to Tapestry as described below, in the two years prior to Tapestry’s proposal to acquire Capri made on April 4 through the date the Merger Agreement was executed, Capri did not have any discussions with any other party regarding a potential acquisition of Capri or one or more of its brands that led to Capri entering into a confidentiality or standstill agreement, or sharing non-public information, with any such party.
On November 1, 2022, the Board of Directors held a meeting. At the meeting, representatives of Barclays reviewed certain potential strategic alternatives the Board of Directors could consider pursuing, including a sale of Capri, an initial public offering of equity interests of a holding company owning Capri’s luxury businesses of Versace and Jimmy Choo (which we refer to as a “Versace and Jimmy Choo IPO”) and a sale of Capri’s Versace and Jimmy Choo businesses, as well as maintaining the status quo and continuing to execute on Capri’s standalone business plan. Representatives of Barclays indicated their view that, based upon their knowledge of the global personal luxury goods industry and the likely strategic and financial buyers of companies with similar characteristics as Capri in such industry, there were likely only a limited number of other parties who might be interested in, and capable of, purchasing the whole company, and that while there was likely to be strategic interest in acquiring the Versace business, there would likely be less strategic interest in acquiring the luxury businesses of Versace and Jimmy Choo together. After discussion, the Board of Directors authorized Capri senior management to work with advisors to further explore the potential for a Versace and Jimmy Choo IPO.
On January 31, the Board of Directors held a meeting. At the meeting, representatives of Barclays and members of Capri’s senior management reviewed the work that had been done with respect to a Versace and Jimmy Choo IPO since the November 1, 2022 meeting. After discussion, the Board of Directors determined that a Versace and Jimmy Choo IPO could be value enhancing at the appropriate time, but not at that time, and determined to revisit the exploration of a Versace and Jimmy Choo IPO at a later date.
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On March 20, Joanne Crevoiserat, Director and Chief Executive Officer of Tapestry, contacted Mr. Idol to request a meeting to discuss industry dynamics and the strategic opportunities and challenges that both Tapestry and Capri face. Ms. Crevoiserat followed up with Mr. Idol on March 30 to request that the parties meet to discuss a topic of strategic importance.
On April 4, Ms. Crevoiserat and Mr. Idol met, at which meeting Ms. Crevoiserat proposed to Mr. Idol an acquisition of Capri by Tapestry in an all-cash transaction priced at $60.00 per Capri ordinary share (which we refer to as the “April 4 proposal”). Ms. Crevoiserat indicated that she would provide a formal written offer to Mr. Idol outlining the April 4 proposal the following day.
On April 5, Ms. Crevoiserat sent Mr. Idol a letter (which we refer to as the “April 5 Tapestry Letter” and together with the April 4 proposal, the “April Tapestry Offer”) containing the terms of the April 4 proposal and highlighting certain priority due diligence items. David Howard, General Counsel and Secretary of Tapestry, also shared a draft confidentiality agreement with Krista McDonough, Senior Vice President, General Counsel and Chief Sustainability Officer of Capri, containing, among other terms, a customary standstill provision.
On April 5, Mr. Idol called Robin Freestone, Lead Director of the Board of Directors, to notify him of the April Tapestry Offer, and arranged for Ms. McDonough to coordinate holding a meeting of the Board of Directors on April 10.
On April 7, Mr. Idol, Mr. Edwards, Ms. McDonough and a representative of Barclays had a call with Mr. Freestone to discuss the April Tapestry Offer and to review the agenda and materials for the upcoming Board of Directors meeting.
On April 10, the Board of Directors held a meeting. At the meeting, Mr. Idol updated the Board of Directors regarding the April Tapestry Offer. Representatives of Wachtell, Lipton, Rosen & Katz (which we refer to as “Wachtell Lipton”), counsel to Capri, then provided an overview of the Board of Directors’ fiduciary and statutory duties, including in considering the April Tapestry Offer. The Board of Directors then discussed with members of Capri senior management and representatives of Barclays the April Tapestry Offer and other potential strategic alternatives, including a Versace and Jimmy Choo IPO, a sale of the Versace and Jimmy Choo businesses and maintaining the status quo and continuing to execute on Capri’s standalone business plan, the timing of the letter vis-à-vis Capri’s fiscal year end and other potential acquirors that could conceivably be interested in, and capable of, acquiring Capri. Representatives of Barclays indicated their view that, based upon their knowledge of the global personal luxury goods industry and the likely strategic and financial buyers of targets with similar characteristics as Capri in such industry, there were likely only a limited number of other parties who might be interested in, and capable of, purchasing the whole company and paying a price comparable to or above that offered by Tapestry. After discussion, the Board of Directors determined that it would make a decision regarding the April Tapestry Offer after Capri senior management had completed and reviewed with the Board of Directors its fiscal year 2024 budget and three-year plan, which were being prepared in the ordinary course, and requested Barclays to review at a subsequent Board of Directors meeting, Barclays’ preliminary financial analyses of Capri and strategic alternatives that might be available to Capri. After the representatives of Barclays departed the meeting, Mr. Idol also discussed with the Board of Directors the potential engagement of Barclays as financial advisor in connection with the April Tapestry Offer and other similar transactions. The Board of Directors authorized Capri senior management to negotiate an engagement of Barclays as discussed at the meeting, with management to revert to the Board of Directors for final approval of an engagement once all key terms were negotiated.
On April 11, Mr. Idol sent a letter to Ms. Crevoiserat indicating that he had discussed the April Tapestry Offer with the Board of Directors and that the Board of Directors would not be in a position to respond substantively until the first half of May due to Capri’s fiscal year having just ended and the ongoing ordinary course preparation of Capri management’s fiscal year 2024 budget and three-year plan.
On May 1, Mr. Idol and the Chairman and Chief Executive Officer of a multi-industry holding company (which we refer to as “Company A”) had a meeting. At the meeting, the Chairman and Chief Executive Officer of Company A discussed with Mr. Idol on a preliminary basis a range of potential transactions, including either an acquisition of both Versace and Jimmy Choo or a potential investment in Versace and Jimmy Choo in the event Capri pursued a Versace and Jimmy Choo IPO. The Chairman and Chief Executive Officer of Company A indicated to Mr. Idol that the two should meet again at a later date to discuss further.
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On May 1, the Chairman and Chief Executive Officer of an international luxury goods company (which we refer to as “Company B”), who Mr. Idol has previously spoken to in 2020, told Mr. Idol, that Company B was interested in resuming prior conversations between the parties concerning a potential acquisition of both Versace and Jimmy Choo. Mr. Idol and the Chairman and Chief Executive Officer of Company B agreed to discuss further at a later date.
On May 2, the Board of Directors held a meeting. Mr. Idol and Mr. Edwards presented regarding Capri’s expected fiscal year 2023 financial performance, Capri management’s fiscal year 2024 budget and three-year plan and the May 2023 Projections (as defined below). After discussion, the Board of Directors approved the May 2023 Projections. Also at the meeting, the Board of Directors met in executive session, during which session Mr. Idol updated the other members of the Board of Directors on his conversations with representatives of Company A and Company B, and indicated his belief based on those conversations that neither Company A nor Company B was interested in purchasing the whole company. Messrs. Idol and Edwards and Ms. McDonough reviewed with the Board of Directors the proposed terms of the engagement of Barclays, as well as a disclosure letter containing Barclays’ conflict of interest disclosures, and the Board of Directors, after discussion, resolved to authorize the engagement of Barclays on the terms discussed.
On May 9, the Board of Directors held a meeting. Representatives of Barclays reviewed its preliminary financial analysis of Capri and also discussed certain potential strategic alternatives, including a sale of Capri, a Versace and Jimmy Choo IPO and a sale of Capri’s Versace and Jimmy Choo brands, as well as maintaining the status quo and continuing to execute on Capri’s standalone business plan. The representatives of Barclays also reiterated their view that, based upon their knowledge of the global personal luxury goods industry and the likely strategic and financial buyers of targets with similar characteristics as Capri in such industry, there were likely only a limited number of other parties who might be interested in, and capable of, purchasing the whole company and paying a price comparable to or above that offered by Tapestry, and their preliminary views regarding Tapestry’s ability to finance the transaction and the potential terms thereof. The Board of Directors further discussed that pursuing an acquisition of Capri was likely to be more value enhancing than the other alternatives discussed, including a sale of Versace and Jimmy Choo, a Versace and Jimmy Choo IPO and maintaining the status quo and continuing to execute on Capri’s standalone business plan, taking into account, among other things, the preliminary analysis discussed with Barclays and the execution risk and timing associated with the different alternatives discussed. After discussion, the Board of Directors indicated its support for exploring the proposed transaction with Tapestry and authorized Capri’s management to engage in discussions with Tapestry regarding the April Tapestry Offer (including negotiating and executing a confidentiality agreement and providing Tapestry with nonpublic information to facilitate a due diligence investigation at the appropriate time), and instructed Mr. Idol to keep the Board of Directors apprised of the status of discussions.
On May 9, at the instruction of Capri senior management, representatives of Barclays indicated to representatives of Morgan Stanley & Co., LLC (which we refer to as “Morgan Stanley”), financial advisor to Tapestry, that the Board of Directors was supportive of providing Tapestry with due diligence as part of exploring a sale of Capri to Tapestry but that Tapestry would need to improve its offer above $60.00 per Capri ordinary share.
On May 10, representatives of Morgan Stanley, at the direction of Tapestry, communicated to representatives of Barclays that Tapestry would not increase its bid at that time and would need access to additional diligence materials that demonstrated increased value in order to consider an increased offer.
On May 21, the Board of Directors held a meeting. Mr. Edwards, Ms. McDonough and representatives of Barclays and Wachtell Lipton were in attendance. Representatives of Barclays reviewed its preliminary financial analysis of Capri and reviewed with the Board of Directors certain potential strategic alternatives, including a sale of Capri, a Versace and Jimmy Choo IPO and a sale of Capri’s Versace and Jimmy Choo brands, as well as maintaining the status quo and continuing to execute on Capri’s standalone business plan. The representatives of Barclays also reiterated their view that, based upon their knowledge of the global personal luxury goods industry and the likely strategic and financial buyers of targets with similar characteristics as Capri in such industry, there were likely only a limited number of other parties who might be interested in, and capable of, purchasing the whole company and paying a price comparable to or above that offered by Tapestry. The Board of Directors discussed that pursuing an acquisition of Capri was likely to be more value enhancing than the other alternatives discussed, including a sale of Versace and Jimmy Choo, a Versace and Jimmy Choo IPO and maintaining the status quo and continuing to execute on Capri’s standalone business plan, taking into account, among other things, the preliminary analysis discussed with Barclays and the execution risk and timing associated with the different alternatives discussed. Mr. Idol also discussed with the Board of Directors fourth quarter and fiscal 2023 year end results and
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business trends, risks and opportunities. After discussion, the Board of Directors continued to indicate its support for exploring the proposed transaction with Tapestry, authorized Capri senior management and its advisors to continue discussions with Tapestry, and instructed Capri senior management to keep the Board of Directors apprised of the status of discussions.
On May 31, Capri issued a press release announcing its earnings for the fourth quarter of its 2023 fiscal year, indicating a 10.5% decrease in total revenue in the fourth quarter of fiscal year 2023 compared to the fourth quarter of fiscal year 2022. The price of Capri ordinary shares fell 10.34% during the trading day.
On June 5, at the instruction of Capri senior management, representatives of Barclays contacted representatives of Morgan Stanley to inquire whether the April Tapestry Offer was still outstanding. Representatives of Morgan Stanley indicated to representatives of Barclays that Tapestry continued to be interested in a proposed transaction, but would need to be provided with additional due diligence, including responses to its initial diligence requests from the April 5 Tapestry Letter, before Tapestry would be prepared to engage further on value. Representatives of Barclays conveyed the request for additional due diligence to Capri senior management. Representatives of Morgan Stanley and Barclays also discussed arranging a meeting between the Capri and Tapestry management teams on June 12.
Also on June 5, Mr. Idol and the Chairman and Chief Executive Officer of Company A again met. At the meeting, the Chairman and Chief Executive Officer of Company A discussed with Mr. Idol on a preliminary basis either an acquisition of both Versace and Jimmy Choo or a potential investment in Versace and Jimmy Choo in the event Capri pursued a Versace and Jimmy Choo IPO. The Chairman and Chief Executive Officer of Company A indicated to Mr. Idol that the two should meet again at a later date to discuss further.
On June 8, ahead of the management meeting scheduled for June 12, Ms. McDonough sent Mr. Howard comments to the draft confidentiality agreement and responses to the diligence requests contained in the April 5 Tapestry Letter.
On June 12, Mr. Idol, Ms. Crevoiserat and representatives of Barclays and Morgan Stanley met and discussed Tapestry’s due diligence requests and timing expectations for both parties. Ms. Crevoiserat indicated that if Tapestry received adequate due diligence, Tapestry would use best efforts to submit a revised proposal by July 11.
On June 13, Capri and Tapestry executed a confidentiality agreement, containing, among other terms, a customary standstill provision.
On June 14, representatives of Barclays, at the direction of Capri management, granted Tapestry and its advisors access to Capri’s virtual data room.
On June 15, Ms. McDonough, Mr. Howard and other representatives of Tapestry and representatives of Wachtell Lipton and Latham & Watkins LLP (which we refer to as “Latham & Watkins”), counsel to Tapestry, met to discuss regulatory filings potentially required in connection with a potential transaction.
On June 21, Messrs. Idol and Edwards and Ms. McDonough participated in an in-person management meeting with Ms. Crevoiserat, Mr. Howard, Scott Roe, Chief Financial Officer and Chief Operating Officer of Tapestry, and other representatives of Tapestry where Capri management reviewed certain business and financial due diligence items with Tapestry. Capri provided the May 2023 Projections to Tapestry and its advisors in advance of such meeting, and Messrs. Idol and Edwards further discussed the May 2023 Projections with representatives of Tapestry and Morgan Stanley at the meeting. Representatives of Barclays, Latham & Watkins, Morgan Stanley and Wachtell Lipton also attended the meeting.
On June 28, Mr. Edwards and Ms. McDonough participated in a video conference call with Messrs. Roe and Howard and other representatives of Tapestry in order to answer further business and financial due diligence requests of Tapestry. Representatives of Barclays, Latham & Watkins, Morgan Stanley and Wachtell Lipton also attended the meeting. Mr. Edwards again discussed the May 2023 Projections with representatives of Tapestry and Morgan Stanley during the meeting. Ms. McDonough, Mr. Howard and representatives of Tapestry, along with representatives of Wachtell Lipton and Latham & Watkins, also held a legal due diligence call later that day.
On June 28, Mr. Idol and the Chairman and Chief Executive Officer of Company A had a meeting. At the meeting, the Chairman and Chief Executive Officer of Company A indicated Company A was only interested in a potential investment in Versace and Jimmy Choo. The parties discussed an investment in Capri, but Company A indicated that any interest in Capri would be a minority stake.
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On July 11, Ms. Crevoiserat and Mr. Idol, together with representatives of Barclays and Morgan Stanley, met. Representatives of Morgan Stanley indicated that Tapestry required additional business due diligence before submitting its revised proposal.
On July 17, representatives of Morgan Stanley spoke with representatives of Barclays to coordinate a call between Capri and Tapestry’s chief financial officers to discuss Capri’s financial and operating performance in the first quarter of its 2024 fiscal year.
On July 20, Mr. Edwards and Ms. McDonough met with representatives of Tapestry, including Messrs. Roe and Howard, to discuss Capri’s financial and operating performance in the first quarter of its 2024 fiscal year. Representatives of Barclays and Morgan Stanley also attended the meeting.
From the date prior to the April 4 Proposal through the end of the trading day on July 26, Capri’s share price fell from $47.03 to $36.47, or 22.5%.
On July 27, Ms. Crevoiserat spoke to, and subsequently submitted a revised offer letter to, Mr. Idol proposing an acquisition of Capri by Tapestry in an all-cash transaction priced at $54.00 per Capri ordinary share, based on factors, including, among others, the learnings and conclusions that Tapestry had drawn from the diligence provided by Capri. Mr. Idol, based on prior discussions with the Board of Directors, rejected the proposal.
Throughout the day on July 27, representatives of Barclays, at the instruction of Capri senior management, and representatives of Morgan Stanley, at the instruction of Tapestry senior management, exchanged multiple calls to discuss the offer price. During these calls, representatives of Barclays and Morgan Stanley, each at the instruction of their respective client, discussed their clients’ respective flexibility on price, with Morgan Stanley indicating Tapestry may be willing to increase its all-cash offer to $55.00 and Barclays indicating that Capri may be willing to accept an all-cash offer of $59.00, in each case, subject to approval of their respective boards of directors and negotiation of definitive transaction documentation. During these calls, representatives of Barclays also indicated, at the instruction of Capri senior management, that Capri may be willing, if Tapestry increased its offer price, to accept an offer that did not contain a “go-shop” provision permitting Capri to solicit alternative offers for Capri and for either of the Versace and/or Jimmy Choo brands for a limited period following signing of the merger agreement subject to the approval of the Board of Directors.
On July 29, representatives of Morgan Stanley, at the instruction of Tapestry senior management, called representatives of Barclays and proposed a revised all-cash proposal of $56.50 per Capri ordinary share (the “July 29 Proposal”). Representatives of Morgan Stanley indicated that the increased offer price was conditional on Capri dropping its request to include a “go-shop” provision in the merger agreement. Representatives of Morgan Stanley and Barclays also discussed the timeline for negotiating and executing transaction agreements and announcing a potential transaction if the parties were able to agree on terms, and Barclays conveyed Capri’s desire to sign and announce a transaction on or prior to August 10. Morgan Stanley indicated that Tapestry would be willing to use best efforts to meet that timeline if it received satisfactory responses to its various diligence requests in a timely manner.
On July 29, Mr. Idol and the Chief Executive Officer of a luxury fashion house (which we refer to as “Company C”) had a meeting. The Chief Executive Officer of Company C discussed with Mr. Idol on a preliminary basis the potential acquisition by Company C of a minority stake in Versace and Jimmy Choo. Mr. Idol indicated that, based on prior discussions of the Board of Directors, he did not believe that the Board of Directors would be interested in such a transaction. The parties then discussed a potential acquisition by Company C of a majority stake in Versace and Jimmy Choo. The Chief Executive Officer of Company C indicated to Mr. Idol that he or she would meet again with Mr. Idol in the fall of 2023 to discuss a potential transaction further.
On July 30, at the instruction of Capri senior management and based on prior discussions of the Board of Directors, representatives of Barclays contacted representatives of Morgan Stanley and rejected Tapestry’s July 29 Proposal.
Later in the day on July 30, Ms. Crevoiserat contacted Mr. Idol. After discussion, Ms. Crevoiserat and Mr. Idol agreed that each would propose a revised all-cash price of $57.00 per Capri ordinary share to their respective boards of directors, without a “go-shop” provision in the merger agreement, subject to all other terms and conditions being negotiated and agreed. Ms. Crevoiserat also informed Mr. Idol that she required to meet with the chief executive officers of each of Versace, Jimmy Choo and Michael Kors, as well as Donatella Versace and Michael Kors before
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finalizing any transaction. Ms. Crevoiserat and Mr. Idol also discussed the timing of announcement of the transaction and agreed to use best efforts to announce a potential transaction, subject to completion of Tapestry’s diligence, the approval of each party’s respective boards of directors and provided the parties could agree upon final terms, on or prior to August 10.
On July 31, the Board of Directors held a meeting. Mr. Edwards, Ms. McDonough and representatives of Barclays and Wachtell Lipton were present at the meeting. Messrs. Idol and Edwards provided an update on the status of negotiations with Tapestry, the due diligence conducted by Tapestry, Ms. Crevoiserat’s request to meet with the chief executive officers of Versace, Jimmy Choo and Michael Kors, Ms. Versace and Mr. Kors, the current state of Capri’s business and the personal luxury goods industry in North America, Europe and Asia and the competitive landscape of the industry and the August 2023 Projections (as defined below), including the additional planned capital expenditures to refurbish Michael Kors stores not reflected in the May 2023 Projections, forward-looking trends and changes in business performance. Mr. Idol also provided an update on discussions with representatives of Company A and Company C (as well as the fact that there had been no further discussions with Company B since the May 1 meeting) and indicated his view that there were likely only a limited number of other parties who might be interested in, and capable of, purchasing the whole company and paying a price comparable to or above that offered by Tapestry, and that none of Company A, Company B or Company C expressed interest in acquiring the whole company. Next, representatives of Barclays reviewed the revised proposal, and Barclays’ preliminary financial analysis of Capri. The Board of Directors, management and representatives of Barclays discussed the factors driving the decrease in Tapestry’s proposed price since the April Tapestry Offer, including, among others, the ongoing negative dynamics in the industry, learnings and conclusions that Tapestry may have drawn from its due diligence findings, Capri’s recent negative share price performance (including that its share price had declined approximately 22.5% since the April Tapestry Offer) and its implications for the premium paid analysis. Next, Ms. McDonough and representatives of Wachtell Lipton discussed key legal considerations and terms in connection with the transaction, including regulatory considerations, conditions to closing and provisions regarding Capri’s ability to solicit and enter into competing proposals. Lastly, Mr. Idol discussed potential timing of announcing the transaction on or prior to August 10 (and potentially postponing Capri’s scheduled first quarter fiscal year 2024 earnings announcement to coincide with announcement of the transaction). Discussion ensued, and the Board of Directors resolved to authorize Capri senior management to move forward with negotiating, together with its advisors, the terms and conditions of the potential transaction at the revised price of $57.00 per Capri ordinary share, subject to the Board of Directors’ review and approval of the final terms. The Board of Directors, after discussion, also approved the August 2023 Projections subject to Mr. Edwards finalizing the August 2023 Projections consistent with the Board of Directors’ discussion at the meeting.
On August 1, representatives of Latham & Watkins sent representatives of Wachtell Lipton a draft merger agreement, which, among other things, proposed (a) a fee equal to 4.5% of the total equity consideration payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to acceptance of a competing proposal by Capri, (b) that Tapestry would reimburse Capri’s expenses up to $20 million in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals, (c) that Capri would reimburse Tapestry’s expenses up to $20 million in the event the merger agreement were terminated due to a failure of Capri’s shareholders to approve the transaction and (d) that the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be one year following signing of the merger agreement, subject to two three-month extensions in certain circumstances.
On August 3, representatives of Wachtell Lipton sent representatives of Latham & Watkins a revised draft of the merger agreement, which, among other things, (a) proposed a fee equal to 2.5% of the total equity consideration payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to acceptance of a competing proposal by Capri, (b) proposed a fee equal to 2.5% of the total equity consideration payable by Tapestry to Capri in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals, (c) rejected the proposal that Capri would reimburse Tapestry’s expenses in connection with a failure of Capri’s shareholders to approve the transaction and (d) proposed that the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be six months following signing of the merger agreement, subject to two three-month extensions in certain circumstances.
On August 3, Mr. Edwards sent representatives of Barclays the August 2023 Projections, which had been finalized consistent with the Board of Directors’ instructions at the July 31 meeting.
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From August 4 until the signing of the merger agreement, representatives of Wachtell Lipton and Latham & Watkins negotiated ancillary materials, including the Articles of Merger and the Plan of Merger.
On August 6, representatives of Latham & Watkins sent representatives of Wachtell Lipton a revised draft of the merger agreement, which, among other things, (a) proposed a fee equal to 4% of the total equity consideration payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to acceptance of a competing proposal by Capri, (b) proposed that Tapestry would reimburse Capri’s expenses up to $25 million in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals, (c) reinserted the proposal that Capri would reimburse Tapestry’s expenses in connection with a failure of Capri’s shareholders to approve the transaction and (d) reverted to the prior proposal that the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be one year following signing of the merger agreement, subject to two three-month extensions in certain circumstances.
Later that day on August 6, representatives of Wachtell Lipton sent representatives of Latham & Watkins an initial draft of the Capri disclosure letter.
Throughout the week of July 31 and until shortly prior to the signing of the merger agreement, representatives of Tapestry and its advisors received access to additional due diligence information from Capri and continued to conduct due diligence on Capri’s business, including through scheduling and attending calls with members of Capri management and reviewing information provided by Capri through a virtual data room.
On August 6, Ms. Crevoiserat met with Jenna Hendricks, Senior Vice President and Chief People Officer of Capri, to discuss certain human resources diligence matters and the employee culture at Capri and its brands.
In the morning on August 7, Capri issued a press release announcing the rescheduling of its first quarter fiscal year 2024 earnings release and conference call to August 10.
On August 7, the Chief Executive Officer of Company C reached out to Mr. Idol to express interest in conducting due diligence to assess whether to potentially acquire a majority stake in Versace and Jimmy Choo. Based on prior discussions with the Board of Directors and given the status of negotiations with Tapestry, Mr. Idol did not respond to the Chief Executive Officer of Company C.
On August 7, Ms. Crevoiserat, Mr. Idol and Ms. Hendricks met with the chief executive officers of Versace, Jimmy Choo and Michael Kors in order to discuss the proposed transaction and the creative direction and financial and operating performance of Versace, Jimmy Choo and Michael Kors, respectively. Also on August 7, Ms. Crevoiserat, Mr. Idol and Ms. Hendricks met with Michael Kors to discuss Tapestry’s creative vision for the Michael Kors brand.
Later in the day on August 7, Messrs. Roe and Howard and representatives of Morgan Stanley met with Mr. Edwards, Ms. McDonough and representatives of Barclays to discuss financial due diligence matters, including the August 2023 Projections.
Early in the morning of August 8, representatives of Wachtell Lipton sent representatives of Latham & Watkins a revised draft of the merger agreement, which, among other things, (a) proposed a fee equal to 2.5% of the total equity consideration payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to acceptance of a competing proposal by Capri, (b) proposed that Tapestry would reimburse Capri’s expenses up to $85 million in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals, (c) rejected the proposal that Capri would reimburse Tapestry’s expenses in connection with a failure of Capri’s shareholders to approve the transaction and (d) proposed that the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be one year following signing of the merger agreement, subject to one three-month extension in certain circumstances.
On August 8, the Board of Directors held a meeting. Mr. Edwards, Ms. McDonough, Ms. Hendricks and representatives of Barclays and Wachtell Lipton were present at the meeting. Representatives of Wachtell Lipton provided a review of the Board of Directors’ fiduciary and statutory duties in the context of the consideration of the proposed transaction. Mr. Idol, Ms. McDonough and representatives of Barclays and Wachtell Lipton updated the Board of Directors on negotiations with Tapestry since the July 31 meeting, including a detailed review of the key provisions of the current draft of the merger agreement and the unresolved issues, Tapestry’s contemplated financing
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of the transaction, the expected timeline to obtain shareholder and regulatory approvals following announcement of the transaction and the meetings with the chief executive officers of Versace, Jimmy Choo and Michael Kors, Ms. Versace and Mr. Kors, which Ms. Crevoiserat had requested. Discussion ensued, and the Board of Directors resolved to authorize Capri senior management to continue negotiating, together with its advisors, the remaining terms and conditions of the potential transaction, subject to the Board of Directors’ review and approval of the final terms. The Board of Directors agreed to reconvene on August 9 to consider approval of the final terms of the transaction, if the negotiations had concluded by such time.
On August 8, Mr. Idol and Ms. Hendricks introduced Ms. Crevoiserat to Ms. Versace and the two discussed the potential transaction.
On August 8, representatives of Latham & Watkins sent representatives of Wachtell Lipton a revised draft of the merger agreement, which, among other things, (a) proposed a fee equal to 4% of the total equity consideration payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to acceptance of a competing proposal by Capri, (b) proposed that Tapestry would reimburse Capri’s expenses up to $25 million in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals, (c) accepted that Capri would not be required to reimburse Tapestry’s expenses in connection with a failure of Capri’s shareholders to approve the transaction and (d) reverted to the proposal that the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be one year following signing of the merger agreement, subject to two three-month extensions in certain circumstances.
On the morning of August 9, Mr. Idol, Mr. Edwards, Ms. McDonough, Ms. Crevoiserat, Mr. Roe, Mr. Howard and representatives of Barclays and Morgan Stanley met to discuss the remaining outstanding issues in the draft merger agreement and agreed, among other things, that (a) the outside date after which either party could terminate the merger agreement if the transaction has not yet been consummated would be one year following signing of the merger agreement, subject to two three-month extensions in certain circumstances, (b) the termination fee payable by Capri to Tapestry in the event the merger agreement were terminated in connection with events relating to competing proposals would equal approximately 3.5% of equity value and (c) the expense reimbursement payable by Tapestry to Capri in the event the merger agreement were terminated in connection with events relating to failure to obtain regulatory approvals would be subject to a cap which would be equal to $30 million, $40 million or $50 million depending on the timing of the termination.
Later on the morning of August 9, representatives of Latham & Watkins sent representatives of Wachtell Lipton a draft of the Tapestry disclosure letter.
Later in the day on August 9, the Board of Directors held a meeting. Mr. Edwards, Ms. McDonough, Ms. Hendricks and representatives of Barclays and Wachtell Lipton were present at the meeting. Representatives of Wachtell Lipton reminded the Board of Directors of their fiduciary and statutory duties in the context of the consideration of the proposed transaction and described the outcome of the parties’ negotiations over the remaining outstanding issues. Representatives of Barclays reviewed their financial analyses of Capri and the proposed transaction and delivered an oral opinion, subsequently confirmed by delivery of a written opinion, that, as of the date of such opinion and based upon and subject to the various matters and limitations set forth in the written opinion, the consideration to be offered to the shareholders of Capri pursuant to the merger agreement was fair to such shareholders from a financial point of view. After discussion, the Board of Directors adopted resolutions (a) approving and authorizing Capri to execute and deliver the Merger Agreement, the Articles of Merger, the Plan of Merger and the other documents contemplated thereby, and approving the Merger and the transactions contemplated by the Merger Agreement, (b) determining that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (c) recommending that the Capri shareholders adopt a resolution authorizing the Merger Agreement and the Plan of Merger and approving the Merger and the transactions contemplated by the Merger Agreement and (d) submitting the Merger Agreement and the Plan of Merger to the holders of Capri ordinary shares for their approval.
On the evening of August 9, the Wall Street Journal announced that Tapestry and Capri were close to reaching agreement to enter into a transaction pursuant to which Tapestry would acquire Capri.
On August 9 and through the morning of August 10, representatives of Wachtell Lipton and Latham & Watkins finalized the draft merger agreement, related disclosure letters and all ancillary materials.
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On the morning of August 10, Capri, Tapestry and Merger Sub executed the Merger Agreement and Capri and Tapestry issued a joint press release announcing the entry into the Merger Agreement.
Recommendation of the Board of Directors and Reasons for the Merger
Recommendation of the Board of Directors
The Board of Directors has unanimously: (a) determined that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (b) recommended that the shareholders of Capri adopt a resolution authorizing the Merger Agreement and the Plan of Merger and approve the Merger and the other transactions contemplated by the Merger Agreement, and (c) resolved to submit such matters for approval by Capri shareholders at the Special Meeting.
The Board of Directors unanimously recommends that you vote: (1) “FOR” the adoption of the Merger Agreement; (2) “FOR” the Compensation Proposal; and (3) “FOR” the adjournment of the Special Meeting, if necessary or appropriate, including to solicit additional proxies if there are insufficient votes to adopt the Merger Agreement at the time of the Special Meeting.
Reasons for the Merger
The Board of Directors recommends that you vote “FOR” approval of the Merger Agreement Proposal.
The Board of Directors, at a meeting held on August 9, 2023, adopted resolutions unanimously (a) approving and authorizing Capri to execute and deliver the Merger Agreement, the Plan of Merger and the other documents contemplated thereby, and approving the Merger and the other transactions contemplated by the Merger Agreement, (b) determining that the Merger and the other transactions contemplated by the Merger Agreement are advisable, fair to and in the best interests of Capri and its shareholders, (c) recommending that Capri’s shareholders approve the Merger Agreement Proposal, and (d) submitting the Merger Agreement and the Plan of Merger to Capri shareholders for their approval.
In arriving at its determinations and recommendations, the Board of Directors reviewed and discussed a significant amount of information and consulted with members of senior management and its independent legal and financial advisors.
Potential Positive Factors. In recommending that shareholders vote in favor of the Merger Agreement Proposal, the Board of Directors considered a number of factors, including, among others, the following (not necessarily in order of relative importance) that the Board of Directors believes support its decision:
Attractive Value. The Board of Directors’ belief that the per share merger consideration of $57.00 in cash per Capri ordinary share provides our shareholders with an attractive value for their ordinary shares in light of a number of factors, including:
Premium. The per share Merger Consideration constitutes a premium of approximately 59% to Capri’s 30-day volume-weighted average ordinary share price for the period ending August 9, 2023, the last full trading day prior to the announcement of the entry into the Merger Agreement, and approximately 65% to the closing price of Capri ordinary shares on August 9, 2023, the last full trading day prior to the announcement of the entry into the Merger Agreement.
Certainty of Value. The per share Merger Consideration is all cash, which provides our shareholders immediate certainty of value and liquidity for their shares and enables our shareholders to realize value that has been created at Capri while eliminating long-term business and execution risk.
Receipt of Fairness Opinion from Barclays. The Board of Directors considered the financial analysis presented to the Board of Directors by Barclays. The Board of Directors also considered the oral opinion of Barclays rendered to the Board of Directors, subsequently confirmed by delivery of a written opinion, that, as of the date of such opinion and based upon and subject to the various matters and limitations set forth in the written opinion, the consideration to be offered to the shareholders of Capri in the Merger is fair to such shareholders from a financial point of view, as more fully described in the section entitled “Proposal 1: Adoption of the Merger Agreement—Opinion of Barclays Capital Inc.” and which written opinion is attached in its entirety as Annex B hereto.
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Value Relative to Standalone Prospects. The Board of Directors’ belief that the per share Merger Consideration compares favorably to the potential long-term value of our ordinary shares if Capri were to remain as a standalone business after taking into account the risks and uncertainties associated with remaining a standalone business, including Capri’s business, competitive position and current industry and financial conditions. Specifically, among other things, the Board of Directors considered:
its assessment of Capri’s business, assets and prospects, its competitive position and historical and projected financial performance, including the Capri management projections;
the challenges of operating as a standalone public company, including balancing the competing needs for improved or stable shareholder returns on a quarter-to-quarter basis, on the one hand, with the need for increased spending, including capital expenditures, to advance implementation of Capri’s long-term strategic plan, on the other hand;
the macroeconomic factors currently affecting the global luxury and accessories industries, including inflationary pressures and depressed consumer spending, and the broad economic, political and commercial trends affecting Capri’s business and financial results, including the recent slowdown in the U.S. and certain foreign economies, including in China, and consumer traffic (and risk of a further slowdown), declines in the wholesale business and certain other risk factors detailed in the Annual Report and Capri’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2023;
the fact that Capri’s ordinary shares have historically traded at a price implying a lower valuation as a multiple of its earnings than its competitors’ shares have traded;
the execution risks implicit in the Capri management projections, including the risk that new product designs may not succeed as planned, the risk that we may not be successful in continuing to elevate Michael Kors to become a stronger and more profitable brand or that we may not be able to grow Versace and Jimmy Choo in line with our projections, the risk that our brands omni-channel strategy may not be successful in driving retail sales, the risk relating to implementation of key systems, the risk that capital expenditure requirements will be greater than those projected and may not have the projected impact on the expected timeline or at all and the risk that we are unable to retain key talent; and
the risks and uncertainties relating to the competition our brands face from other accessories, footwear and apparel manufacturers and retailers as well as third-party distribution channels that sell our merchandise, such as e-commerce, department stores and specialty stores.
Value Relative to Other Strategic Alternatives. The Board of Directors’ belief that Tapestry was the potential transaction partner most likely to offer the best combination of value and certainty to shareholders. In reaching that determination, the Board of Directors considered, among other things:
its belief that a sale of Capri is more value-enhancing than other alternatives available, including a sale or IPO of one or more of Capri’s brands or maintaining the status quo and continuing to execute on Capri’s standalone business plan, taking into account, among other things, the execution risk and timing associated with the different alternatives discussed;
its belief that there were a limited number of other parties who would be interested in, and capable of, purchasing the whole company and paying a price comparable to or above that offered by Tapestry;
that Mr. Idol had informal discussions with other potential counterparties, and none of those potential counterparties expressed interest in an acquisition of all of Capri, nor did any potential counterparty actively pursue any other potential transaction in the same manner as Tapestry, as described in the section entitled “Proposal 1: Adoption of the Merger Agreement—Background of the Merger”; and
Capri’s rights under the Merger Agreement, subject to certain conditions, to respond to and negotiate with respect to certain unsolicited acquisition proposals made prior to the time Capri’s shareholders approve the Merger Agreement Proposal and, in certain instances, to terminate the Merger Agreement to enter into an agreement with respect to a Superior Proposal, subject to Tapestry’s right to receive payment of the Termination Fee of $240 million, which amount the Board of Directors believed to be
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reasonable under the circumstances, taking into account the size of the transaction and the range of similar termination fees in comparable transactions, as described in the sections entitled “The Merger Agreement—Non-Solicitation Covenant” and “The Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation.”
Non-Price Terms of the Merger Agreement. The Board of Directors considered the non-price terms and conditions of the Merger Agreement, including, among others:
the absence of any financing condition to consummation of the Merger;
the provision allowing the Board of Directors to change its recommendation prior to obtaining the Capri Shareholder Approval in specified circumstances relating to a Superior Proposal or Intervening Event, subject to Tapestry’s right to terminate the Merger Agreement and receive payment of the Termination Fee of $240 million;
the provision allowing the Board of Directors to terminate the Merger Agreement to enter into a Superior Proposal, subject to certain conditions (including certain rights of Tapestry to match the Superior Proposal and payment of the Termination Fee of $240 million), as described in the sections entitled “The Merger Agreement—Non-Solicitation Covenant”, “The Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation”, “The Merger Agreement—Termination of the Merger Agreement” and “The Merger Agreement—Termination Fee Payable by Capri”;
the fact that the conditions to the closing of the Merger are specific and limited in scope, as described in the section entitled “The Merger Agreement—Conditions to the Closing of the Merger”;
the provisions requiring Tapestry to use its reasonable best efforts to take or cause to be taken all actions, and do or cause to be done all things, necessary, proper or advisable to consummate the Merger and the other transactions contemplated by the Merger Agreement as promptly as reasonably practicable (and in any event by the Outside Date), including obtaining the regulatory approvals necessary to consummate the Merger, subject to certain limitations specified in the Merger Agreement, as described in the section entitled “The Merger Agreement—Regulatory Approvals and Related Matters”;
the fact that, if the Merger Agreement is terminated in certain circumstances in connection with the failure to obtain required regulatory approvals or the existence of legal prohibitions, Tapestry will be required to reimburse Capri’s expenses incurred in connection with the transaction up to a cap of $30 million if the Merger Agreement is terminated on or before August 10, 2024, $40 million if the Merger Agreement is terminated on or before November 10, 2024 (but after August 10, 2024) and $50 million if the Merger Agreement is terminated following November 10, 2024;
the Outside Date of the Merger Agreement on which either party, subject to certain exceptions, can terminate the Merger Agreement, and the Board of Directors’ view that such Outside Date, which may be extended up to 18 months following signing of the Merger Agreement if all conditions are satisfied other than the receipt of the regulatory approvals or the absence of legal prohibitions, allows for sufficient time to consummate the Merger;
the fact that the Merger Agreement provides Capri sufficient operating flexibility to conduct its business in the ordinary course until the earlier of the consummation of the Merger and the termination of the Merger Agreement, as more fully described in the section entitled “The Merger Agreement—Conduct of Business Pending the Merger”; and
the fact that the Merger is not subject to the approval of Tapestry’s shareholders.
Opportunity for Capri’s Shareholders to Vote. The Board of Directors considered the fact that the Merger would be subject to the approval of Capri’s shareholders, and that shareholders would be free to evaluate the Merger and vote for or against the Merger Agreement Proposal at the Special Meeting.
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Dissenters’ Rights. The Board of Directors considered the availability of dissenters’ rights under the BVI Act in connection with the Merger for Capri’s shareholders who timely and properly exercise such rights in compliance with Section 179 of the BVI Act and the absence of any closing conditions in the Merger Agreement related to the exercise of appraisal rights by Capri’s shareholders.
Negotiation Process. The Board of Directors considered the fact that the terms of the Merger Agreement were informed by the advice and professional experience of Capri’s advisors and were the result of robust negotiations.
Specific Performance. The Board of Directors considered Capri’s ability, under circumstances specified in the Merger Agreement, to seek specific performance of Tapestry’s and Merger Sub’s obligation to cause the Merger to be consummated and prevent other breaches of the Merger Agreement.
Potential Negative Factors. In the course of reaching its recommendation, the Board of Directors also considered a variety of risks and potentially negative factors concerning the Merger and the Merger Agreement, including the following (not necessarily in order of relative importance), among others:
the fact that completion of the transaction depends on certain factors outside of Capri’s control, including regulatory approvals and the Capri Shareholder Approval, and there can be no assurance that all of the conditions to the transaction will be satisfied in a timely manner or at all even if the Merger Agreement Proposal is approved by Capri shareholders;
the risk that the pendency of the Merger or failure to consummate the Merger could adversely affect the operations of Capri and its subsidiaries and the relationships of Capri and its subsidiaries with their respective employees (including making it more difficult to attract and retain key personnel), customers, key designers, suppliers and others with whom they have business dealings and that the Outside Date following which either party may terminate the Merger Agreement could be extended up to 18 months following the signing of the Merger Agreement;
that our shareholders will have no ongoing equity participation in Capri following the Merger, and our shareholders will cease to participate in Capri’s future earnings and growth, if any, and will not benefit from increases, if any, in the value of Capri or any of its brands following the Merger;
that Capri’s share price has not yet reflected all of the potential benefits of Capri’s investments in management’s strategic plan;
that our ordinary shares traded at a price higher than the per share Merger Consideration of $57.00 as recently as February 7, 2023;
the fact that Tapestry initially offered a price of $60.00 per share, which is higher than the final agreed-upon per share Merger Consideration of $57.00 per share, as described in the section entitled “Proposal 1: Adoption of the Merger Agreement—Background of the Merger”;
the effect that a failure to consummate the Merger, for any reason, could have on the price of our ordinary shares and on the market’s perceptions of Capri’s prospects, resulting in loss of value to our shareholders;
the restrictions imposed by the terms of the Merger Agreement on the conduct of Capri’s business prior to consummation of the Merger, which may delay or prevent Capri from capitalizing on business opportunities that may arise pending consummation of the Merger, including in light of the risk that the Outside Date could be extended up to 18 months following the signing of the Merger Agreement, and the resultant risk if the Merger is not consummated, as described in the section entitled “The Merger Agreement—Conduct of Business Pending the Merger”;
the significant effort and cost involved in connection with negotiating the Merger Agreement and consummating the Merger (including certain costs and expenses if the Merger is not consummated), and the substantial time and effort of management required to consummate the Merger and the potential further disruptions to Capri’s day-to-day operations during the pendency of the Merger;
the possibility that Capri may be required to pay Tapestry the Termination Fee of $240 million under certain circumstances following termination of the Merger Agreement, including if the Board of Directors changes its recommendation in light of an Intervening Event or terminates the Merger Agreement to accept a
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Superior Proposal, which may discourage other parties that otherwise might have an interest in a business combination with, or an acquisition of, Capri or may reduce the price offered by such other parties in a competing bid, as described in the section entitled “The Merger Agreement—Termination Fee Payable by Capri”;
the restrictions imposed by the Merger Agreement on soliciting competing acquisition proposals from third parties, as described in the sections entitled “The Merger Agreement—Non-Solicitation Covenant” and “The Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation”;
the effect that the right afforded to Tapestry under the Merger Agreement to match acquisition proposals from third parties may have to discourage other parties that might otherwise have an interest in a business combination with, or an acquisition of, Capri, as described in the sections entitled “The Merger Agreement—Non-Solicitation Covenant” and “The Merger Agreement—The Board of Directors’ Recommendation; Change of Recommendation”;
the potential for litigation by shareholders in connection with the Merger, which, even where lacking in merit, could nonetheless result in distraction and expense;
the fact that the receipt of cash in exchange for our ordinary shares pursuant to the Merger will be a taxable transaction for many of our shareholders;
the fact that Capri’s directors and executive officers may have interests in the Merger that are different from, or in addition to, the interests of our shareholders, as described in the section entitled “Proposal 1: Adoption of the Merger Agreement—Interests of Capri’s Executive Officers and Directors in the Merger”; and
certain other risk factors detailed in the Annual Report and Capri’s Quarterly Report on Form 10-Q for the fiscal quarter ended July 1, 2023.
The foregoing discussion of the information and factors considered by the Board of Directors is intended to be illustrative and not exhaustive, but includes the material factors considered by the Board of Directors. In reaching its determination and recommendation, the Board of Directors did not quantify, rank or assign any relative or specific weight to any of the foregoing factors, and individual members of the Board of Directors may have considered various factors differently. The Board of Directors did not undertake to make any specific determination as to whether any specific factor, or any particular aspect of any factor, supported or did not support its ultimate recommendation. Moreover, in considering the information and factors described above, each individual member of the Board of Directors applied his or her own personal business judgment to the process and may have given differing weights to differing factors. The Board of Directors based its recommendation on the totality of the information presented. The explanation of the factors and reasoning set forth above contain forward-looking statements that should be read in conjunction with the section of this proxy statement entitled “Forward-Looking Statements.”
Opinion of Barclays Capital Inc.
Capri engaged Barclays to act as its financial advisor with respect to pursuing strategic alternatives for Capri, including a possible sale of Capri, pursuant to an engagement letter dated May 2, 2023. On August 9, 2023, Barclays rendered its oral opinion (which was subsequently confirmed in writing) to the Board of Directors that, as of the date of such opinion and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to the shareholders of Capri in the Merger is fair to such shareholders from a financial point of view.
The full text of Barclays’ written opinion is attached as Annex B to this proxy statement. Barclays’ written opinion sets forth, among other things, the assumptions made, procedures followed, factors considered and limitations upon the review undertaken by Barclays in rendering its opinion. You are encouraged to read the opinion carefully in its entirety. The following is a summary of Barclays’ opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.
Barclays’ opinion, the issuance of which was approved by Barclays’ Valuation and Fairness Opinion Committee, is addressed to the Board of Directors, addresses only the fairness, from a financial point of view, of the consideration to be offered to the shareholders of Capri and does not constitute a recommendation to any shareholder of Capri as to how such shareholder should vote with respect to the Merger or any other matter. The terms of the Merger were
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determined through arm’s-length negotiations between Capri and Tapestry and were unanimously approved by the Board of Directors. Barclays did not recommend any specific form of consideration to Capri or that any specific form of consideration constituted the only appropriate consideration for the Merger. Barclays was not requested to address, and its opinion does not in any manner address, Capri’s underlying business decision to proceed with or effect the Merger, the likelihood of the consummation of the Merger, or the relative merits of the Merger as compared to any other transaction in which Capri may engage. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the consideration to be offered to the shareholders of Capri in the Merger. No limitations were imposed by the Board of Directors upon Barclays with respect to the investigations made or procedures followed by it in rendering its opinion.
In arriving at its opinion, Barclays, among other things:
reviewed and analyzed the Merger Agreement and the specific terms of the Merger;
reviewed and analyzed publicly available information concerning Capri that Barclays believed to be relevant to its analysis, including Capri’s Annual Report on Form 10-K for the fiscal year ended April 1, 2023 and Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31, 2022, October 1, 2022, and July 2, 2022;
reviewed and analyzed financial and operating information with respect to the business, operations and prospects of Capri furnished to Barclays by Capri, including financial projections prepared by Capri’s management;
reviewed and analyzed the trading history of Capri ordinary shares from May 2021 through July 2023;
reviewed and analyzed a comparison of the projected future financial results and trading multiples of Capri with those of other companies that Barclays deemed relevant;
reviewed and analyzed a comparison of the financial terms of the Merger with the financial terms of certain other transactions that Barclays deemed relevant;
had discussions with the management of Capri concerning its business, operations, assets, liabilities, financial condition and prospects; and
has undertaken such other studies, analyses and investigations as Barclays deemed appropriate.
In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by Barclays without any independent verification of such information (and had not assumed responsibility or liability for any independent verification of such information). Barclays also relied upon the assurances of management of Capri that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the management projections of Capri, upon advice of Capri, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Capri as to Capri’s future financial performance. In arriving at its opinion, Barclays assumed no responsibility for and expressed no view as to any such projections or estimates or the assumptions on which they were based. In arriving at its opinion, Barclays did not conduct a physical inspection of the properties and facilities of Capri and did not make or obtain any evaluations or appraisals of the assets or liabilities of Capri. In addition, Barclays was not authorized by Capri to solicit, and did not solicit, any indications of interest from any third party with respect to the purchase of all or a part of Capri’s business. Barclays’ opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of such opinion. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that may have occurred after such date.
Additionally, Barclays assumed the accuracy of the representations and warranties contained in the Merger Agreement in all respects material to Barclays’ analysis. Barclays also assumed, upon the advice of Capri, that all material governmental, regulatory and third-party approvals, consents and releases for the Merger would be obtained within the constraints contemplated by the Merger Agreement and that the Merger will be consummated in accordance with the terms of the Merger Agreement without waiver, modification or amendment of any material term, condition or agreement thereof. Barclays did not express any opinion as to any tax or other consequences that might result from the Merger, nor did Barclays’ opinion address any legal, tax, regulatory or accounting matters, as to which Barclays understood Capri had obtained such advice as it deemed necessary from qualified professionals.
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In connection with rendering its opinion, Barclays performed certain financial, comparative and other analyses as summarized below. In arriving at its opinion, Barclays did not ascribe a specific range of values to the Capri ordinary shares but rather made its determination as to fairness, from a financial point of view, to Capri’s shareholders of the consideration to be offered to such shareholders in the Merger on the basis of various financial and comparative analyses. The preparation of a fairness opinion is a complex process and involves various determinations as to the most appropriate and relevant methods of financial and comparative analyses and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to summary description.
In arriving at its opinion, Barclays did not attribute any particular weight to any single analysis or factor considered by it but rather made qualitative judgments as to the significance and relevance of each analysis and factor relative to all other analyses and factors performed and considered by it and in the context of the circumstances of the particular transaction. Accordingly, Barclays believes that its analyses must be considered as a whole, as considering any portion of such analyses and factors, without considering all analyses and factors as a whole, could create a misleading or incomplete view of the process underlying its opinion.
Summary of Material Financial Analyses
The following is a summary of the material financial analyses used by Barclays in preparing its opinion to the Board of Directors. The summary of Barclays’ analyses and reviews provided below is not a complete description of the analyses and reviews underlying Barclays’ opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of analysis and review and the application of those methods to particular circumstances, and, therefore, is not readily susceptible to summary description.
For the purposes of its analyses and reviews, Barclays made numerous assumptions with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Capri or any other parties to the Merger. No company, business or transaction considered in Barclays’ analyses and reviews is identical to Capri, Tapestry, Merger Sub, or the Merger, and an evaluation of the results of those analyses and reviews is not entirely mathematical. Rather, the analyses and reviews involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, businesses or transactions considered in Barclays’ analyses and reviews. None of Capri, Tapestry, Merger Sub, Barclays or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses and reviews and the ranges of valuations resulting from any particular analysis or review are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of companies, businesses or securities do not purport to be appraisals or reflect the prices at which the companies, businesses or securities may actually be sold. Accordingly, the estimates used in, and the results derived from, Barclays’ analyses and reviews are inherently subject to substantial uncertainty.
The summary of the financial analyses and reviews summarized below include information presented in tabular format. In order to fully understand the financial analyses and reviews used by Barclays, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses and reviews. Considering the data in the tables below without considering the full description of the analyses and reviews, including the methodologies and assumptions underlying the analyses and reviews, could create a misleading or incomplete view of Barclays’ analyses and reviews.
Selected Precedent Transaction Analysis
Barclays reviewed and compared the purchase prices and financial multiples paid in selected other transactions that Barclays, based on its experience with merger and acquisition transactions, deemed relevant. Barclays chose such transactions based on, among other things, the similarity of the applicable target companies in the transactions to Capri with respect to the size, products, margins and other characteristics of their businesses, as well as customer demographic.
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The reasons for and the circumstances surrounding each of the selected precedent transactions analyzed were diverse, and there are inherent differences in the business, operations, financial conditions and prospects of Capri and the companies included in the selected precedent transaction analysis. Accordingly, Barclays believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the proposed transaction. Barclays therefore made qualitative judgments concerning differences between the characteristics of the selected precedent transactions and the Merger which would affect the acquisition values of the selected target companies and Capri. Based upon these judgments, Barclays selected a range of 8.0x to 10.0x multiples of enterprise value to the last twelve month earnings before interest, taxes, depreciation and amortization (which we refer to as “EV/LTM Adjusted EBITDA”), and applied such range to the management projections to calculate a range of implied prices per share of Capri. The following table sets forth the transactions analyzed based on such characteristics and the results of such analysis:
Announcement Date
Acquirer
Target
May 2017
Coach, Inc.
Kate Spade & Company
May 2015
Ascena Retail Group, Inc.
Ann Inc.
December 2013
Sycamore Partners
The Jones Group, Inc.
May 2013
Apax Partners, L.P.
Rue 21, Inc.
October 2012
PVH Corp.
The Warnaco Group, Inc.
November 2010
Leonard Green & Partners, L.P., TPG
J.Crew Group, Inc.
March 2010
PVH Corp.
Tommy Hilfiger
 
Implied Price per Share
EV/LTM Adjusted EBITDA
$49 – $65
Barclays noted that on the basis of the selected precedent transaction analysis, the consideration of $57.00 per ordinary share was within the range of implied values per share calculated using management projections.
Discounted Cash Flow Analysis
In order to estimate the present value of Capri ordinary shares, Barclays performed a discounted cash flow analysis of Capri. A discounted cash flow analysis is a traditional valuation methodology used to derive a valuation of an asset by calculating the “present value” of estimated future cash flows of the asset. “Present value” refers to the current value of future cash flows or amounts and is obtained by discounting those future cash flows or amounts by a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital, expected returns and other appropriate factors.
To calculate the estimated enterprise value of Capri using the discounted cash flow method, Barclays added (1) Capri’s projected after-tax unlevered free cash flows for the last nine months of fiscal year 2024 and fiscal years 2025 through 2028 based on management projections to (2) the “terminal value” of Capri as of March 31, 2028, and discounted such amount to its present value using a range of selected discount rates. The after-tax unlevered free cash flows were calculated by taking the adjusted tax-affected earnings before interest and tax expense, adding back depreciation and amortization, subtracting capital expenditures and other non-recurring expenses and adjusting for changes in working capital. The residual value of Capri at the end of the forecast period, or “terminal value,” was estimated by selecting a perpetuity growth rate of 2.0% which was derived by Barclays using its professional judgment and experience, taking into account the long-term inflation target and applying such growth rate to the management projections. The range of after-tax discount rates of 11.75% to 13.75% was selected based on an analysis of the weighted average cost of capital of Capri. Barclays then calculated a range of implied prices per share of Capri by subtracting estimated net debt as of July 1, 2023 from the estimated enterprise value using the perpetuity growth rate method and dividing such amount by the fully diluted number of outstanding Capri ordinary shares. The following summarizes the result of these calculations:
 
Implied Equity Value per Share
Discounted Cash Flow Analysis
Low
High
 
$53
$67
Barclays noted that on the basis of the discounted cash flow analysis, the consideration of $57.00 per share was within the range of implied values per share calculated using management projections.
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Other Factors
Barclays also reviewed and considered other factors, which were not considered part of its financial analyses in connection with rendering its advice, but were references for informational purposes, including, among other things, the Selected Comparable Company Analysis described below.
Selected Comparable Company Analysis
In order to assess how the public market values shares of similar publicly traded companies and to provide a range of relative implied equity values per ordinary share of Capri by reference to those companies, Barclays reviewed and compared specific financial and operating data relating to Capri with selected companies that Barclays, based on its experience in the luxury apparel and accessories industry, deemed comparable to Capri. The selected comparable companies with respect to Capri were:
Hanesbrands Inc.
Kontoor Brands, Inc.
Carter’s, Inc.
Levi Strauss & Co.
Ralph Lauren Corporation
Thunder Clothing Co.
PVH Corp.
G-III Apparel Group, Ltd.
Barclays calculated and compared various financial multiples and ratios of Capri and the selected comparable companies. As part of its selected comparable company analysis, Barclays calculated and analyzed each company’s ratio of its current stock price to its projected earnings per share for fiscal year 2024 (referred to as “P/FY2024E Adjusted EPS”), and each company’s enterprise value to its projected earnings before interest, taxes, depreciation and amortization for fiscal year 2024 (referred to as “EV/FY2024E Adjusted EBITDA”). The enterprise value of each company was obtained by adding its short and long-term debt to the sum of the market value of its common equity, the value of any preferred stock (at liquidation value) and the book value of any minority interest, and subtracting its cash and cash equivalents. All of these calculations were performed, and based on publicly available financial data (including FactSet) and closing prices, as of August 8, 2023, the last trading date prior to the delivery of Barclays’ opinion. The results of this selected comparable company analysis are summarized below:
 
Range
Average
EV/ FY2024E Adj. EBITDA
4.8x-8.7x
7.6x
P/ FY2024E Adj. EPS
7.4x-14.0x
10.9x
Barclays selected the comparable companies listed above because of similarities in one or more business or operating characteristics with Capri. However, because no selected comparable company is exactly the same as Capri, Barclays believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the selected comparable company analysis. Accordingly, Barclays also made qualitative judgments concerning differences between the business, financial and operating characteristics and prospects of Capri and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. These qualitative judgments related primarily to the differing sizes, growth prospects, profitability levels and degree of operational risk between Capri and the companies included in the selected company analysis. Based upon these judgments, Barclays selected a range of 6.6x to 8.6x multiples for EV/FY2024E Adjusted EBITDA and a range of 9.9x to 11.9x multiples for P/FY2024E Adjusted EPS and applied such range to the management projections to calculate a range of implied prices per ordinary share of Capri. The following summarizes the result of these calculations:
 
Implied Equity Value per Share
Comparable Company Analysis
Low
High
EV/FY2024E Adjusted EBITDA
$43
$60
P/FY2024E Adjusted EPS
$64
$77
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Barclays noted that on the basis of the selected comparable company analysis, the consideration of $57 per share was (1) within the range of implied values per share calculated in accordance with the EV/FY2024E Adjusted EBITDA analysis and (2) below the range of implied values per share calculated in accordance with the P/FY2024E Adjusted EPS analysis.
General
Barclays is an internationally recognized investment banking firm and, as part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The Board of Directors selected Barclays because of its familiarity with Capri and its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions generally, as well as substantial experience in transactions comparable to the Merger.
Barclays is acting as financial advisor to Capri in connection with the proposed transaction. As compensation for its services in connection with the proposed transaction, Capri paid Barclays a fee of $3,000,000 upon the delivery of Barclays’ opinion, which is referred to as the “Opinion Fee.” The Opinion Fee was not contingent upon the conclusion of Barclays’ opinion or the consummation of the Merger. Additional compensation of approximately $56 million will be payable on completion of the Merger, against which the amounts paid for the opinion will be credited. In addition, Capri has agreed to reimburse Barclays for certain reasonable out-of-pocket expenses incurred in connection with the Merger and to indemnify Barclays for certain liabilities that may arise out of its engagement by Capri and the rendering of Barclays’ opinion. Barclays has performed various investment banking and financial services for Capri, Tapestry and their affiliates in the past, and is likely to perform such services in the future, and has received, and is likely to receive, customary fees for such services. For the period from January 1, 2021 through August 9, 2023, Barclays has provided financial services to Capri for which Barclays has received compensation in an amount of approximately $19.4 million. Specifically, in the past two years, Barclays has acted as a counterparty in hedging transactions of Capri’s European net assets. In addition, Barclays is currently a lender under Capri’s existing credit facility and has received and will receive customary fees in connection therewith. Barclays has not performed any investment banking services for Tapestry for which Barclays has earned fees in the past two years.
Barclays and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other financial and non-financial services. In the ordinary course of its business, Barclays and its affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments (including loans and other obligations) of Capri and Tapestry and their respective affiliates for its own account and for the accounts of Barclays’ customers and, accordingly, may at any time hold long or short positions and investments in such securities and financial instruments.
Certain Financial Projections
While Capri has from time to time provided limited financial guidance to investors, Capri does not, as a matter of course, otherwise publicly disclose internal projections as to future performance, earnings, or other results beyond, prior to the announcement of the Merger, the then-next quarterly and the then-current or (in the case of fourth quarter reporting) the then-next annual period due to, among other reasons, the inherent difficulty of accurately predicting financial performance for future periods and the uncertainty, unpredictability and subjectivity of underlying assumptions and estimates. However, in the ordinary course, Capri management prepares longer term strategic projections, which are periodically updated and reviewed with the Board of Directors and reflect Capri management’s financial and business outlook for Capri. In connection with the Merger, Capri is including in this proxy statement a summary of certain limited unaudited prospective financial information of Capri, on a standalone basis, without giving effect to the Merger, prepared by Capri management, because certain financial information was given to the Board of Directors, which it considered in connection with its evaluation of the Merger, as described below, and to Barclays for its use and reliance in connection with the financial analyses presented by Barclays to the Board of Directors and in Barclays’ opinion, as described in the section of this proxy statement entitled “— Opinion of Barclays Capital Inc.”
In early May 2023, as part of the Board of Directors’ and Capri management’s ordinary course planning process, Capri management prepared certain unaudited, preliminary financial projections for Capri for fiscal years 2024 through 2026 and an extrapolation of such projections for fiscal years 2027 and 2028 (which we refer to, collectively,
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as the “May 2023 Projections”). The May 2023 Projections, other than the extrapolation for fiscal years 2027 and 2028 and the unlevered free cash flow, as further described under “— May 2023 Projections,” were subsequently made available to Tapestry in June 2023 as part of Tapestry’s due diligence investigation of Capri. In addition, during June 2023, as a result of ongoing strategic planning and positioning for Capri’s Michael Kors brand, management determined that Capri’s financial projections would need to reflect additional capital expenditures to refurbish Michael Kors stores in upcoming years (which we refer to as the “MK Stores CapEx”) and required updates to account for recent trends. Capri management informed Tapestry of the need to update the May 2023 Projections in connection with Tapestry’s review of the May 2023 Projections, and made such updates in connection with the August 2023 Projections.
Thereafter, Capri management made updates to the May 2023 Projections, which were finalized in early August 2023, to take into account forward-looking trends and changes in business performance and the MK Stores CapEx (such updated financial projections, the “August 2023 Projections”). The Board of Directors reviewed the August 2023 Projections as part of its and management’s ordinary course planning process and considered the August 2023 Projections in connection with its evaluation of Tapestry’s proposal to acquire Capri. In addition, at Capri management’s direction, Barclays used the August 2023 Projections in connection with its financial analyses presented by Barclays to the Board of Directors and in Barclays’ opinion, as described in the section of this proxy statement entitled “— Opinion of Barclays Capital Inc.” The August 2023 Projections, other than the extrapolation for fiscal years 2027 and 2028 and the unlevered free cash flow, as further described under “— August 2023 Projections,” were also made available to Tapestry as part of its ongoing due diligence investigation of Capri.
The May 2023 Projections and the August 2023 Projections are referred to collectively as the “Management Projections.” Capri is including a summary of the Management Projections to provide Capri shareholders with access to information that the Board of Directors considered in connection with its evaluation of the Merger and the Merger Consideration and that was made available to Tapestry.
May 2023 Projections
The May 2023 Projections reflect Capri management’s projections of Capri’s business as a standalone company for fiscal years 2024 through 2026 and extrapolation of such projections for fiscal years 2027 and 2028, except that unlevered free cash flow was arithmetically calculated by Barclays, at the direction of Capri management, using assumptions provided by Capri management and the other financial information included in the May 2023 Projections. The following table summarizes the May 2023 Projections, with dollars in millions:
P&L Detail:
FY2023E(1)
FY2024E
FY2025E
FY2026E
FY2027E
FY2028E
Revenue
$5,619
$5,800
$6,193
$6,636
$6,983
$7,310
Adjusted EBITDA(2)
$1,092
$1,136
$1,229
$1,369
$1,477
$1,566
Adjusted EBIT(3)
$913
$950
$1,021
$1,143
$1,243
$1,324
Capex
$264
$260
$300
$300
$300
$300
Unlevered Free Cash Flow(4)
(5)
$666
$712
$857
$952
$1,057
(1)
Fiscal year 2023 financials were not yet finalized as of the date of the May 2023 Projections.
(2)
Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, excluding certain other non-operating and non-recurring expenses.
(3)
Adjusted EBIT represents earnings before interest and taxes, excluding certain other non-operating and non-recurring expenses.
(4)
Unlevered free cash flow is defined as adjusted EBITDA less certain non-recurring cash expenses, taxes and capital expenditures, plus certain non-cash expenses and adjusted for changes in working capital, in each case, as set forth in the Management Projections.
(5)
Unlevered free cash flow for fiscal year 2023 not included.
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August 2023 Projections
The August 2023 Projections reflect Capri management’s projections of Capri’s business, as a standalone company for fiscal years 2024 through 2026 and extrapolation of such projections for fiscal years 2027 and 2028, except that unlevered free cash flow was arithmetically calculated by Barclays, at the direction of Capri management, using assumptions provided by Capri management and the prospective financial information included in the August 2023 Projections but reflecting the MK Stores CapEx. The following table summarizes the August 2023 Projections, with dollars in millions:
P&L Detail:
FY2023A
FY2024E
FY2025E
FY2026E
FY2027E
FY2028E
Revenue
$5,619
$5,523
$6,193
$6,636
$6,983
$7,310
Adjusted EBITDA(1)
$1,087
$1,036
$1,229
$1,369
$1,477
$1,566
Adjusted EBIT(2)
$908
$850
$1,021
$1,143
$1,243
$1,324
Capex
$226
$260
$500
$500
$300
$300
Unlevered Free Cash Flow(3)
(4)
$546(5)
$506
$657
$951
$1,022
(1)
Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization, excluding certain other non-operating and non-recurring expenses.
(2)
Adjusted EBIT represents earnings before interest and taxes, excluding certain other non-operating and non-recurring expenses.
(3)
Unlevered free cash flow is defined as adjusted EBITDA less certain non-recurring cash expenses, taxes and capital expenditures, plus certain non-cash expenses and adjusted for changes in working capital, in each case, as set forth in the Management Projections.
(4)
Unlevered free cash flow for fiscal year 2023 not included.
(5)
Unlevered free cash flow for 2024E in the August 2023 Projections reflects estimated unlevered free cash flow for the 9 months from Q2 through Q4 2024.
Important Information Regarding the Management Projections
The inclusion of the Management Projections or of this summary does not constitute a representation by Capri, Barclays, or any other person that the information is material, and should not be regarded as an indication that the Board of Directors, Barclays, Capri or its management, or any other recipient of this information considered, or now considers, it to be an accurate prediction of future results, and they should not be relied on as such.
The Management Projections include non-GAAP financial measures, including Adjusted EBITDA and Unlevered Free Cash Flow. Please see the tables above for a description of how Capri defines these non-GAAP financial measures for purposes of the Management Projections in this section. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in accordance with generally accepted accounting principles in the United States (“GAAP”), and non-GAAP financial measures used by Capri may not be comparable to similarly titled measures used by other companies.
The Management Projections and the underlying assumptions upon which the Management Projections were based are subjective in many respects and subject to multiple interpretations and frequent revisions attributable to the dynamics of Capri’s industry and business developments. The Management Projections reflect numerous assumptions with respect to Capri’s performance, industry performance, general business, economic, regulatory, market, and financial conditions, and other matters, many of which are difficult to predict, subject to significant economic and competitive uncertainties, and beyond Capri’s control. The Management Projections constitute forward-looking information and are subject to a wide variety of significant risks and uncertainties, including those described in the section of this proxy statement entitled “Forward-Looking Statements,” that could cause the Management Projections or the underlying assumptions to be inaccurate and for actual results to differ materially from the Management Projections. As a result, there can be no assurance that the Management Projections will be realized or that actual results will not be significantly higher or lower than projected, and the Management Projections cannot be considered a guarantee of future operating results and should not be relied upon as such. Because the Management Projections cover multiple years, such information by its nature becomes less reliable with each successive year. The Management Projections do not take into account any circumstances or events occurring after the date on which they were prepared, including the Merger, and some or all of the assumptions that have been made in connection with the preparation of the Management Projections may have changed since the date the Management Projections were prepared. Economic and business environments can and do change quickly, which adds an additional significant level of uncertainty as to whether the results portrayed in the Management Projections will be achieved.
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In addition, the Management Projections have not been updated or revised to reflect information or results after the date the Management Projections were prepared or as of the date of this proxy statement. None of Capri, Tapestry or any of Capri’s or Tapestry’s respective affiliates intends to, and each of them disclaims any obligation to, update or otherwise revise the Management Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error (except, in the case of Capri, as required by applicable securities laws). These considerations should be taken into account in reviewing the Management Projections, which were prepared as of an earlier date.
For the foregoing reasons, and considering that the Special Meeting will be held several months after the Management Projections were prepared, as well as the uncertainties inherent in any forecasting information, readers of this proxy statement are cautioned not to place unwarranted reliance on the Management Projections. The Management Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information contained in Capri’s public filings with the SEC. Capri urges all of its shareholders to review its most recent SEC filings for a description of its reported financial results. See the section of this proxy statement entitled “Where You Can Find More Information.”
The Management Projections were not prepared with the purpose of, or with a view toward, public disclosure or toward compliance with GAAP, published guidelines of the SEC, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Neither Ernst & Young LLP (“Ernst & Young”), Capri’s independent registered public accounting firm, nor any other accounting firm, has examined, compiled, or performed any procedures with respect to the Management Projections and, accordingly, neither Ernst & Young nor any other accounting firm expresses an opinion or any other form of assurance with respect thereto. The Ernst & Young report included in Capri’s Annual Report on Form 10-K incorporated by reference in this proxy statement relates to Capri’s historical financial information. It does not extend to the prospective financial information contained herein and should not be read to do so.
None of Capri or its affiliates, directors, executive officers, advisors or other representatives has made or makes any representation to any Capri shareholder or to Tapestry or Merger Sub in the Merger Agreement or otherwise concerning the Management Projections or regarding Capri’s ultimate performance compared to the information contained in the Management Projections or that the projected results will be achieved.
Interests of Capri’s Executive Officers and Directors in the Merger
In considering the recommendation of the Board of Directors that Capri shareholders approve the transaction and vote in favor of the Merger Agreement Proposal, the Compensation Proposal and the Adjournment Proposal, Capri shareholders should be aware that the executive officers and directors of Capri have interests in the transactions that are or may be different from, or in addition to, the interests of Capri shareholders generally. The Board of Directors was aware of these interests and considered them, among other matters, in approving the Merger Agreement and the transactions contemplated by it, including the Merger, and in making their recommendation that Capri shareholders adopt the Merger Agreement.
These interests are described in more detail below, and certain of them are quantified in the narrative below, including compensation that may become payable in connection with the Merger to Capri’s named executive officers (which is the subject of an advisory (nonbinding) vote of Capri shareholders). For more information, please see the section of this proxy statement entitled “Proposal 2: The Compensation Proposal.”
Capri’s named executive officers included in the summary below are:
John D. Idol – Chairman and Chief Executive Officer
Thomas J. Edwards, Jr. – Executive Vice President, Chief Financial Officer and Chief Operating Officer
Jenna A. Hendricks – Senior Vice President, Chief People Officer
Krista A. McDonough – Senior Vice President, General Counsel and Chief Sustainability Officer
For purposes of this disclosure, Capri’s executive officers consist of its named executive officers and Cedric Wilmotte (Chief Executive Officer – Michael Kors). Daniel Purefoy is also deemed to be a named executive officer, but because he separated from employment with Capri on July 29, 2022, he will not receive any benefit that is payable or that may become payable that is based on, or otherwise relates to, the Merger other than the Merger Consideration in respect of any Capri ordinary shares that he owns, and he is not included in the disclosure below.
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Treatment of Capri Equity Awards
As further described in the section entitled “The Merger Agreement — Treatment of Capri Equity Awards,” outstanding Capri equity awards held by Capri’s directors and executive officers will be subject to the following treatment at the Effective Time:
Capri Options. Each Capri Option (A) with a per share exercise price equal to or in excess of the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be converted automatically into a Tapestry Option to purchase the number of shares of Tapestry common stock equal to the product obtained by multiplying (x) the number of Capri ordinary shares subject to the Capri Option immediately prior to the Effective Time, by (y) the Conversion Ratio, with any fractional shares rounded down to the nearest whole share, with an exercise price per share of Tapestry common stock equal to (i) the per share exercise price for Capri ordinary shares subject to the corresponding Capri Option immediately prior to the Effective Time divided by (ii) the Conversion Ratio, rounded up to the nearest whole cent; and (B) with a per share exercise price that is less than the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be cancelled, with the holder of such Capri Option becoming entitled to receive an amount in cash equal to the product obtained by multiplying (i) the number of Capri ordinary shares subject to such Capri Option as of immediately prior to the Effective Time, by (ii) the excess of the Merger Consideration over the per share exercise price applicable to the Capri Option.
Capri RSUs. Each Capri RSU that is outstanding immediately prior to the Effective Time and that is held by a non-employee director or named executive officer of Capri will vest as of the Effective Time and will be cancelled, with the holder of such Capri RSU becoming entitled to receive the Merger Consideration in respect of each Capri ordinary share subject to such Capri RSU immediately prior to the Effective Time, and each Capri RSU not held by a non-employee director or named executive officer of Capri that is outstanding immediately prior to the Effective Time will be converted automatically into a Tapestry RSU equal to the product obtained by multiplying (i) the total number of Capri ordinary shares subject to the Capri RSU immediately prior to the Effective Time by (ii) the Conversion Ratio, with any fractional shares rounded to the nearest whole share.
Capri PSUs. Each Capri PSU that is outstanding immediately prior to the Effective Time will fully vest and be cancelled in consideration for the right to receive the Merger Consideration with respect to the number of Capri ordinary shares equal to the number of Capri ordinary shares subject to such Capri PSU immediately prior to the Effective Time (with such number of Capri ordinary shares determined based on (i) actual performance as determined by the Compensation Committee for any fully completed measurement period or performance period, as applicable, ended prior to the Effective Time to the extent the Compensation Committee can reasonably determine the level of achievement of performance for such completed measurement period or performance period, as applicable, prior to the Effective Time, and (ii) target performance for any measurement period or performance period, as applicable, for which performance has not previously been determined).
The terms and conditions applicable to the Capri Options and Capri RSUs under the Capri equity plan and award agreements held by Capri’s executive officers provide that they will become fully vested and accelerate if the holder’s employment is terminated without “cause” or, to the extent applicable, for “good reason” (each as defined in the applicable award agreement, and each of which we refer to as a “qualifying termination”) within two years following a change in control, including the Merger. The estimated values that would be realized by Capri’s named executive officers in respect of their unvested Capri equity awards in connection with the Merger are set forth below in the section of this proxy statement entitled “— Quantification of Potential Payments and Benefits to Capri’s Named Executive Officers in Connection with the Merger.” Based on the same assumptions set forth in such section (including the applicable footnotes to the table included in such section), (i) the estimated aggregate value that would be realized by Mr. Wilmotte in respect of his unvested Capri equity awards upon a qualifying termination at the Effective Time is: Capri Options—$0 and Capri RSUs—$5,418,249, and (ii) the estimated aggregate value that would be realized by the seven non-employee members of the Board of Directors in respect of their unvested Capri RSUs at the Effective Time is $1,939,539.
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Idol Employment Agreement
Capri is party to an employment agreement with Mr. Idol (which we refer to as the “Idol Employment Agreement”) that provides for certain severance benefits upon a qualifying termination, whether or not in connection with a change in control. Under the Idol Employment Agreement, if Mr. Idol is terminated by Capri without “cause” or he terminates his employment for “good reason,” subject to his execution of a separation agreement and release, he will be entitled to receive the following severance benefits: (i) an amount representing the annual cash incentive payment payable to Mr. Idol for the fiscal year in which his termination date occurs, based on actual performance over the course of the applicable performance period and assuming Mr. Idol’s employment had not been terminated, multiplied by a fraction, the numerator of which is the number of days Mr. Idol was employed during the applicable performance period and the denominator of which is the full number of days in the performance period, (ii) vesting of his equity awards as described above, and (iii) a lump sum payment equal to two times (x) Mr. Idol’s annual base salary then in effect and (ii) the annual cash incentive payment paid or payable to him with respect to Capri’s last full fiscal year ended prior to the termination date.
For an estimate of the value of the severance payments and benefits that would be payable to Mr. Idol upon a qualifying termination under the Idol Employment Agreement, see the section entitled “— Quantification of Payments and Benefits to Capri’s Named Executive Officers” below.
Capri Change in Control Agreements
Each of Messrs. Edwards and Wilmotte and Mmes. Hendricks and McDonough is party to a change in control continuity agreement with Capri (which we refer to as the “CIC Agreements”) that provides for the executive’s continued employment for the two-year period following a change in control with terms of employment that are substantially similar to those applicable prior to the change in control, including with respect to the executive’s position, authority, duties and responsibilities, primary workplace, and compensation and benefits, as well as certain severance benefits upon a termination of employment by Capri (other than for “cause”, death or disability) or by the executive officer for “good reason” that occurs on or within two years following a change in control. The Merger will constitute a change in control under the CIC Agreements.
The CIC Agreements provide for the following payments and benefits upon such a qualifying termination, subject to the executive officer’s execution and non-revocation of a release of claims:
An amount equal to the product of (i) the executive officer’s target annual bonus opportunity and (ii) a fraction, the numerator of which is the number of days in the current fiscal year through the date of termination and the denominator of which is 365 (provided that Mr. Wilmotte will only be entitled to this amount if his qualifying termination occurs during Capri’s 2025 fiscal year or thereafter);
An amount equal to two times the sum of the executive officer’s annual base salary and target annual bonus opportunity;
An amount equal to the product of (i) the monthly premiums for coverage under Capri’s health care plans for purposes of continuation coverage under COBRA with respect to the maximum level of coverage in effect for the executive officer and his or her spouse and dependents as of immediately prior to the date of termination, and (ii) 24; and
Outplacement services, the scope and provider of which shall be selected by the executive officer, with a cost not to exceed $25,000.
In addition, the CIC Agreement with Mr. Wilmotte provides that he will be entitled to the following additional payments and benefits, subject to the same release of claims: (i) if his date of termination occurs prior to June 30, 2024 (or such earlier date that annual bonuses for Capri’s 2024 fiscal year are paid to other peer executives), a cash payment of $1,000,000 (representing the second half of his guaranteed annual bonus with respect to Capri’s 2024 fiscal year), (ii) reimbursement of up to $350,000 for the actual liability to be incurred by the executive officer in terminating his residential lease in New York City, reimbursement of up to $150,000 for the actual liability to be incurred by the executive officer in relocating his residence from New York City to Switzerland, and (iii) $25,000 for tax preparation services with respect to the executive officer’s personal U.S. income tax returns for each of calendar years 2023 and 2024, less any amounts previously paid or reimbursed to the executive officer for such services prior to his date of termination.
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The CIC Agreements contain a Section 280G “net-better” cutback provision, which provides that if the total payments to the executive officer would exceed the applicable threshold under Section 280G of the Code, then those payments will be reduced to the applicable threshold to avoid the imposition of the excise taxes under Section 4999 of the Code in the event, and only in the event, such reduction would result in a better after-tax result for the executive officer.
For an estimate of the value of the payments and benefits described above that would be payable to Capri’s named executive officers under their CIC Agreements upon a qualifying termination in connection with the Merger, see the section titled “— Quantification of Potential Payments and Benefits to Capri’s Named Executive Officers in Connection with the Merger.” Based on the same assumptions set forth in such section (including the applicable footnotes to the table included in such section), the estimated aggregate amount of the severance payments and benefits described above that would be payable to Mr. Wilmotte is $5,595,937, assuming that the maximum reimbursable amounts are reimbursed to the executive officer.
Special Bonus Awards
In connection with the entry into the Merger Agreement, Capri entered into a letter agreement with each of Capri’s executive officers providing that, subject to the executive officer actively working toward the completion of all requirements necessary to consummate the Merger and remaining employed through the closing of the Merger, the executive officer will be eligible to receive a special one-time cash bonus award (which we refer to as the “Special Bonus Awards”) equal to his or her current base salary. If the Merger Agreement is terminated in accordance with its terms (without Capri entering into a subsequent transaction agreement in connection with the receipt of a Superior Proposal), or the executive officer’s employment terminates for any reason prior to the closing of the Merger, the executive officer’s eligibility to receive the Special Bonus Award will automatically terminate and the right to the Special Bonus Award will be forfeited.
For the value of the Special Bonus Awards that would be payable to Capri’s named executive officers at the Effective Time, see the section entitled “— Quantification of Potential Payments and Benefits to Capri Named Executive Officers in Connection with the Merger.” Based on the same assumptions set forth in such section (including the applicable footnotes to the table included in such section), the amount of the Special Bonus Award that would be payable to Mr. Wilmotte is $1,000,000.
Prorated Annual Bonuses
As further described below in the section entitled “The Merger Agreement — Employee Matters,” Tapestry has agreed to, or agreed to cause Capri and its subsidiaries to, pay bonuses to each employee of Capri and its subsidiaries (including each of the executive officers) under Capri’s annual incentive plan in respect of the fiscal year in which the Effective Time occurs in an amount equal to the annual incentive award earned by such employee based on the actual level of performance for the applicable fiscal year through the latest practicable date prior to the Effective Time as determined by the Compensation Committee, prorated for the portion of the fiscal year in which the Effective Time occurs. Such prorated bonuses will be paid by Tapestry, Capri or its subsidiaries at the time or times that the bonuses would normally be paid by Capri or its subsidiaries, subject to such employee’s continued employment through the date of payment, provided that any employee whose employment is terminated on or following the Closing Date and prior to the prorated annual bonus payment date under circumstances that entitle such employee to severance and/or equity award vesting shall be entitled to receive his or her prorated annual bonus, payable as soon as reasonably practicable following the date of such termination of employment. For purposes of this proxy statement, we have assumed that each executive officer will receive a prorated annual bonus based on the target level of performance under the Idol Employment Agreement (in the case of Mr. Idol) and the CIC Agreements (in the case of each other executive officer).
Section 280G and 4999 of the Code
Under the Merger Agreement, if the Effective Time is not reasonably expected to occur in 2023, Capri (in consultation with Tapestry) may implement tax planning strategies for the purpose of mitigating the impact of Sections 280G and 4999 of the Internal Revenue Code and thereby preserve certain compensation-related tax deductions that might otherwise be disallowed. Any such tax planning strategies may include accelerating the vesting or payment of compensation that is scheduled to vest or be paid in the 2024 calendar year into 2023 and accelerating the vesting or payment of compensation that would vest or become payable at or in connection with the Effective Time into 2023. As of the date of this proxy statement, no such tax planning strategies have yet been finalized or implemented.
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“Good Reason” Acknowledgement and Transition or New Arrangements with Tapestry
Under the Merger Agreement, Capri is permitted to enter into letter agreements with each of its named executive officers that acknowledge that such executive officers shall have the right to terminate their employment for “good reason” upon or following the Effective Time under the terms of the Capri benefit plans applicable to such executive officer, unless any of the named executive officers agrees with Tapestry to waive or delay his or her right to terminate employment for “good reason” for up to three months after the Closing (or a mutually agreed longer period). Any executive officers and directors who are retained to provide services to Tapestry or the surviving entity following the closing of the Merger may enter into new individualized compensation arrangements and may participate in cash or equity incentive or other benefit plans maintained by Tapestry or its affiliates. As of the date of this proxy statement, no such letter agreements or new compensation arrangements have been entered into with Capri or Tapestry.
Indemnification and Insurance
Under the Merger Agreement, Capri’s executive officers and directors will be entitled to certain ongoing indemnification and insurance coverage for a period of six years after the Effective Time under directors’ and officers’ liability insurance policies. This indemnification and insurance coverage is further described in the section of this proxy statement entitled “The Merger Agreement — Indemnification and Insurance.”
Quantification of Potential Payments and Benefits to Capri’s Named Executive Officers in Connection with the Merger
This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of Capri’s named executive officers that is based on or that otherwise relates to the Merger. The Merger-related compensation payable to these individuals is subject to a non-binding advisory vote of Capri’s shareholders, as described below in “Proposal 2: The Compensation Proposal.” The table below sets forth, for the purposes of this Merger-related compensation disclosure, the amount of payments and benefits that each Capri named executive officer would receive, using the following assumptions:
The Effective Time occurs on September 8, 2023 (which is an assumed date solely for purposes of this disclosure);
Each named executive officer experiences a qualifying termination of employment immediately following the Effective Time;
Each named executive officer’s base salary and target annual bonus opportunity are those in effect as of September 8, 2023;
Capri equity awards that are outstanding as of September 8, 2023;
For purposes of Mr. Idol’s prorated annual cash incentive award and the Capri PSUs, achievement at the target level of performance; and
A price per share of Capri ordinary shares of $57.00.
The calculations in the table do not include amounts that Capri’s named executive officers were already vested in as of the date of this proxy statement. These amounts also do not reflect compensation actions that may occur after the date of this proxy statement but before the Effective Time (including any additional equity award grants, issuances or forfeitures that may occur after the date of this proxy statement but before the Effective Time).
As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by a named executive officer may materially differ from the amounts set forth below.
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For purposes of this disclosure, “single trigger” refers to payments and benefits that arise solely as a result of the completion of the Merger and “double trigger” refers to payments and benefits that require two conditions, which are the completion of the Merger and a qualifying termination of employment.
Named Executive Officer(4)
Cash
($)(1)
Equity
($)(2)
Benefits
($)(3)
Total
($)
John D. Idol
15,078,462
24,329,310
39,407,772
Thomas J. Edwards, Jr.
4,386,362
8,689,479
$25,000
13,100,841
Jenna A. Hendricks
2,134,840
4,731,684
$25,000
6,891,524
Krista A. McDonough
2,394,562
4,731,684
$25,000
7,151,246
(1)
Cash. The cash amounts equal the sum of the following, as described above: (i) for Mr. Idol, the cash severance payable to Mr. Idol pursuant to the Idol Employment Agreement, which is two times the sum of his annual base salary and the annual cash incentive payment paid or payable to him with respect to Capri’s last full fiscal year ended prior to the termination date, (ii) for Mr. Edwards and Mmes. Hendricks and McDonough, the cash severance payable under the CIC Agreements, which is two times the sum of such named executive officer’s annual base salary and target annual bonus opportunity, (iii) a prorated target annual cash incentive award for the fiscal year in which termination occurs, (iv) for Mr. Edwards and Mmes. Hendricks and McDonough, a payment equal to 24 monthly premiums for coverage under Capri’s health care plans for purposes of continuation coverage under COBRA, and (v) each named executive officer’s Special Bonus Award. The Special Bonus Award is “single trigger,” while all other cash amounts are “double trigger.”
Named Executive Officer
Severance
($)
Special Bonus
Award ($)
Prorated Annual
Bonus ($)
COBRA Payment
($)
John D. Idol
11,340,000
1,350,000
2,388,462
Thomas J. Edwards, Jr.
3,200,000
800,000
353,846
32,516
Jenna A. Hendricks
1,500,000
500,000
110,577
24,263
Krista A. McDonough
1,650,000
550,000
121,635
72,927
(2)
Equity. As described above in the section of this proxy statement titled “Treatment of Capri Equity Awards,” at the Effective Time, the Capri equity awards held by Capri’s named executive officers will be treated as follows: (i) each outstanding Capri Option with a per share exercise price equal to or greater than the Merger Consideration will be converted automatically into a Tapestry Option, adjusted based on the Conversion Ratio, (ii) each outstanding Capri Option with a per share exercise price that is less than the Merger Consideration will be cancelled in exchange for an amount in cash equal to the excess of the Merger Consideration over the per share exercise price applicable to the Capri Option, (iii) each Capri RSU will vest and will be exchanged for the Merger Consideration, and (iv) each Capri PSU will vest and will be exchanged for the Merger Consideration (based on (x) actual performance as determined by the Compensation Committee for any fully completed measurement period or performance period ended prior to the Effective Time and (y) target performance for any measurement period or performance period for which performance has not previously been determined, however, as of the date of this proxy statement, no such measurement or performance period has been fully completed). The amounts shown in this column represent Capri RSUs and Capri PSUs, all of which are “single trigger.” All Capri Options held by the named executive officers as of the date of this proxy statement are fully vested, so no value is included for such Capri Options.
Named Executive Officer
Capri RSUs
($)
Capri PSUs
($)
John D. Idol
12,640,320
11,688,990
Thomas J. Edwards, Jr.
4,563,933
4,125,546
Jenna A. Hendricks
2,475,453
2,256,231
Krista A. McDonough
2,475,453
2,256,231
(3)
Benefits. As described above in the section of this proxy statement titled “Change in Control Agreements,” upon a qualifying termination of employment on or within two years of a Change in Control, Mr. Edwards and Mmes. Hendricks and McDonough are entitled to receive outplacement services up to a maximum cost of $25,000. All amounts in this column are “double trigger.”
(4)
Daniel Purefoy, Capri’s former Senior Vice President, Global Operations and Head of Diversity and Inclusion, terminated employment with Capri on July 29, 2022. He is not entitled to receive any compensation in connection with, or as a result of, the Merger.
Financing of the Merger
Tapestry intends to fund the Financing Amounts with a combination of cash on hand and the proceeds from (a) one or more issuances of senior unsecured debt securities or the borrowing of senior unsecured term loans, or a combination of the foregoing, and/or (b) the Bridge Facility (as defined below). Tapestry has entered into a commitment letter (the “Commitment Letter”), dated as of August 10, 2023, with BofA Securities, Inc., Bank of America, N.A. and Morgan Stanley Senior Funding, Inc. (which we refer to collectively as the “Commitment Parties”), pursuant to which the Commitment Parties have committed to provide a 364-day senior unsecured bridge loan facility in an aggregate principal amount of up to $8.0 billion (the “Bridge Facility”) to fund the Financing Amounts. The funding of the Bridge Facility provided for in the Commitment Letter is subject to customary conditions. Additionally, the Bridge Facility includes customary commitment reductions in the amount of qualified
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term loan commitments and net proceeds of certain debt and equity issuances and asset sales. On August 30, 2023, Tapestry entered into a definitive credit agreement (the “Term Loan Agreement”) whereby Bank of America, N.A., as administrative agent, the other agents party thereto, and a syndicate of banks and financial institutions have committed to lend to Tapestry, subject to the satisfaction or waiver of the conditions set forth in the Term Loan Agreement, (i) a $1.05 billion unsecured term loan facility maturing three years after the term loans thereunder are borrowed (the “Three-Year Term Loan Facility”), and a (ii) $350 million term loan facility maturing five years after the term loans thereunder are borrowed (the “Five-Year Term Loan Facility”; and collectively with the Three-Year Term Loan Facility, the “Term Loan Facilities”). As a result of Tapestry’s entering into the Term Loan Agreement and the commitments thereunder with respect to the Term Loan Facilities, the Bridge Facility commitments were reduced to $6.6 billion. The completion of the Merger is not subject to any financing condition.
Closing and Effective Time
The closing of the Merger (which we refer to as the “Closing”) will take place virtually at 8:00 a.m., Eastern Time, on the third business day after the date on which all conditions to the Closing, which are described below in the section of this proxy statement entitled “The Merger Agreement — Conditions to the Closing of the Merger,” are satisfied or waived (to the extent permitted by applicable law) (other than the conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver thereof at the Closing), or at such other date and place as Capri and Tapestry may agree in writing. The date on which the Closing takes place is herein referred to as the “Closing Date.”
Accounting Treatment
The Merger will be accounted for as a business combination in accordance with the acquisition method of accounting under GAAP. Tapestry management has evaluated the guidance contained in ASC 805, Business Combinations, with respect to the identification of the acquirer in the Merger and concluded, based on a consideration of the pertinent facts and circumstances, that Tapestry will be the acquirer and Capri will be the acquiree for financial accounting purposes. Accordingly, Tapestry will measure the assets acquired and liabilities assumed at their fair values as of the Closing Date, with any excess purchase price over those fair values being recorded as goodwill.
Dissenters’ Rights
Under the laws of the British Virgin Islands, Capri shareholders are entitled to dissent from the Merger in accordance with Section 179 of the BVI Act.
Dissenters’ rights are available only to Capri shareholders whose names are entered in the register of members of Capri as a registered holder of Capri ordinary shares. Any person who holds Capri ordinary shares through a depositary, nominee or broker and who wishes to exercise their right to dissent from the Merger must first ensure that they are entered in the register of members of Capri and have therefore become a “member” for the purposes of the BVI Act. Capri shareholders must comply with the procedures and requirements for exercising dissenters’ rights with respect to their Capri ordinary shares under Section 179 of the BVI Act (which includes the delivery to Capri, before the vote is taken, of a written objection to the Merger).
A holder of Capri ordinary shares who wishes to exercise their dissenters’ rights with respect to their Capri ordinary shares must give a written notice of objection to Capri prior to the Capri Shareholders Meeting or at the Capri Shareholders Meeting but prior to the time that the Merger is submitted to a vote (which we refer to as the “Notice of Objection”). The Notice of Objection must include a statement that such Capri shareholder proposes to demand payment for its Capri ordinary shares if the Merger is approved at the Capri Shareholders Meeting and implemented.
Within 20 days immediately following the date of the Capri Shareholders Meeting at which a vote approving the Merger is taken, Capri must give an approval notice to all Capri shareholders who have served a Notice of Objection (which we refer to as the “Approval Notice”).
A Capri shareholder who has served a Notice of Objection shall, within 20 days immediately following the date on which the Approval Notice is given (which we refer to as the “Dissent Period”), give to Capri a written notice of their desire to elect to dissent (which we refer to as the “Notice of Dissent”). The Notice of Dissent must state (a) the Capri shareholder’s name and address, (b) the number and class of shares in respect of which they dissent (which must be all of the shares which they hold in Capri) and (c) a demand for payment of the fair value of their Capri ordinary shares.
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It is important to note that:
only Capri shareholders who have served a Notice of Objection (or who were not given notice of the Capri Shareholders Meeting) may elect to dissent;
any Capri shareholder who has elected to dissent must dissent in respect of all of the shares which they hold in Capri (as noted above, it is not possible to dissent only in respect of certain shares held by a Capri shareholder, and any Notice of Dissent purporting to do so will be invalid); and
once the Notice of Dissent has been provided to Capri, a dissenting shareholder will cease to have the rights of a Capri shareholder and will only be entitled to receive payment of the fair value of their Capri ordinary shares in accordance with Section 179 of the BVI Act.
Within seven days immediately following (a) the date of expiry of the Dissent Period or (b) the effective date of the Merger, whichever is later, Capri, as the Surviving Company, must make a fair value offer to each dissenting Capri shareholder specifying the consideration determined by Capri to be the fair value of their Dissenting Shares (which we refer to as the “Offer”).
If, within 30 days immediately following the date of the Offer, Capri and the dissenting shareholder fail to agree on the fair value consideration of the Dissenting Shares, then, within 20 days immediately following the date of the expiry of such 30-day period:
Capri and the dissenting shareholder shall each designate an appraiser;
the two designated appraisers together shall designate a third appraiser; and
the three appraisers shall fix the fair value of the Dissenting Shares in accordance with the BVI Act (it should be noted that, under the terms of the BVI Act, fair value would be determined at the close of business on the business day prior to the date on which the vote to approve the Merger was taken at the Capri Shareholders Meeting, excluding any appreciation or depreciation in the value of the Dissenting Shares, directly or indirectly, induced by the proposed merger).
The fair value determined by the three appraisers is binding on Capri and the dissenting shareholder for all purposes. Capri will pay, in cash, the fair value of the Dissenting Shares determined by the appraisers to the dissenting shareholders.
Capri shareholders are cautioned that, if a Capri shareholder initiates an appraisal process, they may be responsible for a portion of the costs of the appraisal.
All notices and petitions (including any Notice of Objection and Notice of Dissent) must be executed by or for the Capri shareholder, fully and correctly, as such Capri shareholder’s name appears on Capri’s register of members. If the Capri ordinary shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, these notices must be executed by or for the fiduciary. A person having a beneficial interest in the Capri ordinary shares held of record in the name of another person, such as a nominee, must act promptly to cause the shareholder of record to follow the steps summarised above and in a timely manner to perfect whatever dissenters’ rights are attached to the Capri ordinary shares.
As explained above, dissenters’ rights are available only to Capri shareholders of record. If you hold any Capri ordinary shares as the beneficial owner but are not the “registered holder” or “member” of such Capri ordinary shares and you wish to exercise dissenters’ rights, you must arrange for such Capri ordinary shares to be registered in your name and comply with the procedures and requirements of Section 179 of the BVI Act.
If you do not satisfy each of these requirements, you will not be entitled to exercise dissenters’ rights and will be bound by the terms of the plan of merger if approved at the Capri Shareholders Meeting.
At or from the Effective Time, all Dissenting Shares shall automatically be cancelled and each holder of Dissenting Shares shall cease to be a shareholder of Capri (and shall not be a shareholder of the Surviving Company) and shall cease to have any rights thereto (including any right to receive such holder’s portion of the aggregate Merger Consideration), subject to and except for such rights as are granted under Section 179 of the BVI Act.
Any Capri shareholder who considers exercising dissent rights is strongly advised to consult legal counsel in the British Virgin Islands.
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Material U.S. Federal Income Tax Consequences of the Merger
The following is a general discussion of certain material U.S. federal income tax consequences of the Merger that may be relevant to U.S. Holders (as defined below) of Capri ordinary shares whose Capri ordinary shares are converted into the right to receive cash pursuant to the Merger. This discussion is limited to U.S. Holders who hold their Capri ordinary shares as “capital assets” within the meaning of Section 1221 of the Internal Revenue Code of 1986, as amended, (which we refer to as the “Code”) (generally, property held for investment). This discussion does not address U.S. federal income tax consequences with respect to holders of Capri ordinary shares other than U.S. Holders. This discussion is based upon the Code, Treasury Regulations promulgated under the Code, rulings and other published positions of the Internal Revenue Service (which we refer to as the “IRS”) and judicial decisions, all as in effect on the date of this proxy statement and all of which are subject to change or differing interpretations at any time, possibly with retroactive effect. Any such change or differing interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax considerations described in this discussion. No advance ruling has been or will be sought from the IRS, and no opinion of counsel has been or will be rendered, regarding the Merger or any matter discussed below.
For purposes of this discussion, a “U.S. Holder” means a beneficial owner of Capri ordinary shares that is for U.S. federal income tax purposes:
an individual who is a citizen or resident of the United States;
a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or
a trust, if (a) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more “United States persons” (within the meaning of the Code) have the authority to control all substantial decisions of the trust or (b) the trust validly elected to be treated as a United States person for U.S. federal income tax purposes.
This discussion is for general information purposes only and does not purport to be a complete analysis of all of the potential tax consequences of the Merger. Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to particular holders in light of their particular facts and circumstances, or to holders subject to special rules under the U.S. federal income tax laws, including, for example:
banks and other financial institutions;
mutual funds;
insurance companies;
brokers or dealers in securities, currencies or commodities;
dealers or traders in securities subject to a mark-to-market method of accounting;
regulated investment companies and real estate investment trusts;
retirement plans, individual retirement and other deferred accounts;
tax-exempt organizations, governmental agencies, instrumentalities or other governmental organizations and pension funds;
U.S. Holders that hold Capri ordinary shares as part of a “straddle,” hedge, constructive sale, or other integrated transaction or conversion transaction or similar transaction;
U.S. Holders whose functional currency is not the U.S. dollar;
partnerships, other entities classified as partnerships for U.S. federal income tax purposes, “S corporations,” or any other pass-through entities for U.S. federal income tax purposes (or investors in such entities);
expatriated entities subject to Section 7874 of the Code;
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U.S. Holders that own or have owned (directly, indirectly or constructively) 5% or more of Capri ordinary shares (by vote or value);
U.S. Holders that received their Capri ordinary shares in a compensatory transaction, through a tax-qualified retirement plan or pursuant to the exercise of options or warrants;
U.S. expatriates and former citizens or long-term residents of the United States;
U.S. Holders that own an equity interest (directly, indirectly or constructively) in Tapestry following the Merger;
U.S. Holders subject to the alternative minimum tax;
U.S. Holders exercising dissenters’ rights in accordance with Section 179 of the BVI Act;
U.S. Holders that hold their Capri ordinary shares through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States; and
holders required to accelerate the recognition of any item of gross income as a result of such income being taken into account on an applicable financial statement.
This discussion does not address any U.S. federal tax considerations other than those pertaining to the income tax (such as estate, gift or other non-income tax consequences) or any state, local or non-U.S. income or non-income tax considerations. In addition, this discussion does not address any considerations arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or any considerations in respect of the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations and administrative guidance promulgated thereunder and intergovernmental agreements entered into pursuant thereto or in connection therewith and any laws, regulations or practices adopted in connection with any such agreement).
If any entity or arrangement treated as a partnership for U.S. federal income tax purposes is a beneficial owner of Capri ordinary shares, the U.S. federal income tax treatment of a partner in such partnership generally will depend upon the status of the partner, the activities of the partner and the partnership and certain determinations made at the partner level. Accordingly, entities or arrangements treated as partnerships holding Capri ordinary shares, and any partners therein, should consult their tax advisors as to the particular tax consequences to them of the Merger.
THE U.S. FEDERAL INCOME TAX TREATMENT OF THE TRANSACTIONS DISCUSSED HEREIN TO ANY PARTICULAR CAPRI SHAREHOLDER WILL DEPEND ON THE CAPRI SHAREHOLDER’S PARTICULAR TAX CIRCUMSTANCES. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, OR UNDER ANY STATE, LOCAL OR NON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Except as specifically discussed below, the following discussion assumes Capri is not a PFIC (as defined below). The receipt of cash by a U.S. Holder in exchange for Capri ordinary shares pursuant to the Merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. Holder who receives cash in exchange for Capri ordinary shares pursuant to the Merger will recognize gain or loss in an amount equal to the difference, if any, between (i) the amount of cash received in the Merger and (ii) the U.S. Holder’s adjusted tax basis in the Capri ordinary shares surrendered in exchange therefor. A U.S. Holder’s adjusted tax basis in its Capri ordinary shares generally will equal the amount that such U.S. Holder paid for such shares. Any such gain or loss will generally be capital gain or loss, and generally will be long-term capital gain or loss if such U.S. Holder’s holding period in the Capri ordinary shares surrendered pursuant to the Merger is more than one year at the time of the completion of the Merger. Long-term capital gains of certain non-corporate holders, including individuals, currently are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. Holder acquired different blocks of Capri ordinary shares at different times or different prices, such U.S. Holder must determine its adjusted tax basis and holding period separately with respect to each block of Capri ordinary shares.
A non-U.S. corporation, such as Capri, will be classified as a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax purposes for any taxable year in which, after the application of certain look-through rules,
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either: (i) 75% or more of its gross income for such taxable year is “passive income” as defined in the relevant provisions of the Code (e.g., dividends, interest, royalties, rents, annuities, net gains from the sale or exchange of property producing such income and net foreign currency gains), or (ii) 50% or more of the total value of its assets (based on an average of the quarterly values of the assets during such year) is attributable to assets, including cash, that produce “passive income” or are held for the production of “passive income.” Although it is not free from doubt, based on the composition of Capri’s gross assets and income and the manner in which Capri has operated its business, Capri does not believe that it has been classified as a PFIC for U.S. federal income tax purposes for prior taxable years or that it will be so classified for the taxable year including the Merger. However, the determination of PFIC status is fundamentally factual in nature, depends on the application of complex U.S. federal income tax rules that are subject to differing interpretations and generally cannot be determined until the close of the taxable year in question. Accordingly, there can be no assurance that Capri will not be a PFIC for the taxable year including the Merger or that Capri has not been a PFIC for any other taxable year. If Capri were classified as a PFIC for any taxable year during which a U.S. Holder held Capri ordinary shares, such classification could result in adverse tax consequences to such U.S. Holder, and different U.S. federal income tax consequences from those described above may apply to the receipt of cash by such U.S. Holder in exchange for Capri ordinary shares pursuant to the Merger. These consequences may include having gains realized on the receipt of cash in exchange for Capri ordinary shares treated as ordinary income rather than capital gain and being subject to punitive interest charges on such gains.
Information Reporting and Backup Withholding
Information reporting requirements may apply in connection with payments made to U.S. Holders in connection with the Merger.
Backup withholding (currently, at a rate of 24%) generally will apply to the proceeds received by a U.S. Holder pursuant to the Merger, unless the U.S. Holder provides the applicable withholding agent with a properly completed and executed IRS Form W-9 providing such U.S. Holder’s correct taxpayer identification number and certifying that such U.S. Holder is not subject to backup withholding, or otherwise establishes an exemption, and otherwise complies with the backup withholding rules. Certain U.S. Holders (including corporations) are not subject to backup withholding or information reporting.
Backup withholding is not an additional tax. The amount of any backup withholding withheld from a payment to a U.S. Holder may be refunded or credited against such U.S. Holder’s U.S. federal income tax liability, if any, provided that the required information is timely furnished to the IRS.
U.S. Holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY. IT DOES NOT ADDRESS TAX CONSIDERATIONS THAT MAY VARY WITH, OR ARE CONTINGENT ON, YOUR INDIVIDUAL CIRCUMSTANCES OR THE APPLICATION OF ANY U.S. NON-INCOME TAX LAWS OR THE LAWS OF ANY STATE, LOCAL OR NON-U.S. JURISDICTION, AND HOLDERS SHOULD CONSULT THEIR TAX ADVISORS REGARDING SUCH MATTERS AND THE TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
Regulatory Approvals Required for the Merger
General
Each of the parties to the Merger Agreement has agreed to (subject to the terms and conditions of the Merger Agreement) use its reasonable best efforts to take promptly, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement as soon as practicable (and in event by the Outside Date), including obtaining of all necessary waiting period expirations or terminations, consents, clearances, waivers, licenses, orders, registrations, approvals, permits and authorizations, orders and other confirmations from governmental entities as described in the section of this proxy statement entitled “The Merger Agreement — Regulatory Approvals and Related Matters.” These approvals include clearances under the HSR Act and regulatory approvals under the laws of certain other jurisdictions.
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U.S. Regulatory Clearances
Under the Merger Agreement, the Merger cannot be completed until the waiting period applicable to the Merger under the HSR Act has expired or been terminated and any and all agreements with governmental entities pursuant to which such parties have agreed not to consummate the transactions contemplated by the Merger Agreement until a specified time has expired, been terminated or been waived. A transaction notifiable under the HSR Act may not be completed until the expiration or termination of an initial 30-day waiting period following the parties’ filings of their HSR Act notification and report forms. If the Federal Trade Commission (which we refer to as the “FTC”) or the Antitrust Division of the Department of Justice (which we refer to as the “DOJ”) issues a request for additional information and documentary materials (which we refer to as a “Second Request”) prior to the expiration of the initial 30-day waiting period, the parties must observe a second 30-day waiting period, which would begin to run only after the parties have certified “substantial compliance” with the Second Request, unless the waiting period is terminated earlier or the parties otherwise agree to give the FTC or the DOJ additional time to conduct their review through a timing agreement. The parties made the required filings with the FTC and the DOJ pursuant to the HSR Act on August 31, 2023.
At any time before or after consummation of the Merger, notwithstanding the expiration or termination of the waiting period under the HSR Act, the FTC or the DOJ could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the completion of the Merger, seeking divestiture of substantial assets of the parties, or requiring the parties to license or hold separate assets or terminate existing relationships and contractual rights. At any time before or after consummation of the Merger, any state attorney general could take such action under the antitrust laws as it deems necessary or desirable in the public interest. Such action could include seeking to enjoin the completion of the Merger or seeking divestiture of substantial assets of the parties. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot be certain that a challenge to the Merger will not be made or that, if a challenge is made, that we will prevail.
Other Regulatory Clearances
The Merger is also subject to receipt of pending regulatory approvals in certain other jurisdictions. In particular, the Merger is subject to clearance or approval under the antitrust laws in Australia, Canada, China, the EU (or, in the alternative, under the national merger control regimes of certain EU member states), Japan, Korea, and the United Kingdom. The Merger is also subject to approval by the European Commission under the EU Foreign Subsidies Regulation (Regulation EU 2022/2560).
In each case, the Merger cannot be completed until the parties obtain clearance or approval to consummate the Merger or the applicable waiting periods have expired or been terminated. The parties have agreed to cooperate with each other and use their reasonable best efforts to make these filings as promptly as reasonably practicable. The relevant regulatory authorities could take such actions under the applicable regulatory laws as they deem necessary or desirable, including (but not limited to) seeking divestiture of substantial assets of the parties or requiring the parties to license, or hold separate, assets or terminate existing relationships and contractual rights.
Required Vote
The affirmative vote of the holders of a majority of the outstanding Capri ordinary shares present virtually or represented by proxy at the Special Meeting and entitled to vote thereon is required for approval of the Merger Agreement Proposal.
Assuming a quorum is present, (a) a failure to be represented by proxy or attend the Special Meeting, (b) abstentions and (c) “broker non-votes” (if any) will each have the same effect as a vote “AGAINST” the Merger Agreement Proposal. Capri ordinary shares represented by properly executed, timely received and unrevoked proxies will be voted in accordance with the instructions indicated thereon. If a Capri shareholder returns a signed proxy card without indicating voting preferences on such proxy card, the Capri ordinary shares represented by that proxy will be counted as present for purposes of determining the presence of a quorum for the Special Meeting, and all of such shares will be voted as recommended by the Board of Directors.
The Board of Directors unanimously recommends that you vote “FOR” the Merger Agreement Proposal.
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THE MERGER AGREEMENT
The following summarizes the provisions of the Merger Agreement. The descriptions of the Merger Agreement in this summary and elsewhere in this proxy statement are not complete and are qualified in their entirety by reference to the Merger Agreement, a copy of which is attached to this proxy statement as Annex A and incorporated into this proxy statement by reference. You should carefully read and consider the entire Merger Agreement, which is the legal document that governs the Merger, because this summary may not contain all of the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
The representations, warranties, covenants and agreements described below and included in the Merger Agreement (a) were made only for purposes of the Merger Agreement and as of specific dates; (b) were made solely for the benefit of the parties to the Merger Agreement; and (c) may be subject to important qualifications, limitations and supplemental information agreed to by Capri, Tapestry and Merger Sub in connection with negotiating the terms of the Merger Agreement. In addition, the representations and warranties have been included in the Merger Agreement for the purpose of allocating contractual risk between Capri, Tapestry and Merger Sub rather than to establish matters as facts, and may be subject to standards of materiality applicable to such parties that differ from those applicable to investors. Capri shareholders are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of Capri, Tapestry or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Merger Agreement. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of Capri, Tapestry and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure letters to the Merger Agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public. The Merger Agreement is described below, and included as Annex A, only to provide you with information regarding its terms and conditions, and not to provide any other factual information regarding Capri, Tapestry, Merger Sub or their respective businesses. Accordingly, the representations, warranties, covenants and other agreements in the Merger Agreement should not be read alone, and you should read the information provided elsewhere in this document and in our filings with the SEC regarding Capri and our business.
Effects of the Merger; Directors and Officers; Memorandum and Articles of Association
The Merger Agreement provides that, in accordance with the BVI Business Companies Act (Revised Edition 2020) (as amended) (which we refer to as the “BVI Act”) and on the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Merger Sub will merge with and into Capri, the separate existence of Merger Sub will cease and Capri will be the Surviving Company and a wholly owned subsidiary of Tapestry.
Unless otherwise determined by Tapestry prior to the Effective Time, the directors and officers of Merger Sub as of immediately prior to the Effective Time will be the initial directors and officers of the Surviving Company and will hold office until their respective successors are duly elected and qualified, or their earlier death, incapacitation, retirement, resignation or removal. Immediately following the Effective Time, Tapestry intends to amend and restate Capri’s memorandum and articles of association in the form of the memorandum and articles of association of Merger Sub, as in effect immediately prior to the Effective Time (but amended so that the name of the Surviving Company will be “Capri Holdings Limited”).
Closing and Effective Time
The Closing will take place at 8:00 a.m., Eastern Time, remotely by exchange of documents and signatures (or their electronic counterparts), on the third business day after the date on which all conditions to Closing, which are described below in the section of this proxy statement entitled “— Conditions to the Closing of the Merger,” are satisfied or waived (to the extent permitted by applicable law) (other than those conditions that by their nature are to be satisfied by actions to be taken at the Closing, but subject to the satisfaction or waiver of such conditions) or at such other place, time and date as Capri and Tapestry may agree in writing.
At the Closing, the parties will file articles of merger, which will have attached to it a plan of merger, with the Registrar of Corporate Affairs of the British Virgin Islands (which we refer to as the “Registrar”) and make all other filings or recordings required under the BVI Act in connection with the Merger. The Effective Time will occur at such time as the articles of merger are duly registered by the Registrar or at such other date or time as may be agreed in writing by Capri and Tapestry and specified in the articles of merger in accordance with the BVI Act.
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Merger Consideration
Capri Ordinary Shares
At the Effective Time, by virtue of the Merger and without any action on the part of Capri, Tapestry, Merger Sub, or the holders of any securities of Capri or Merger Sub, each Capri ordinary share issued and outstanding immediately prior to the Effective Time (other than (a) each share that is owned or held in treasury by Capri or is owned by Tapestry or any of its direct or indirect subsidiaries, which will be cancelled and will cease to exist (which we refer to as “Cancelled Shares”) and (b) each share held by a shareholder who properly demands in writing, and does not withdraw or lose, its dissenters’ rights in accordance with Section 179 of the BVI Act and otherwise complies with all provisions of the BVI Act relevant to the exercise and perfection of dissenters’ rights (which we refer to as the “Dissenting Shares”)) will be cancelled and the holder will have the right to receive $57.00 in cash, without interest (which we refer to as the “Merger Consideration”), subject to any required tax withholding.
Treatment of Capri Equity Awards
Capri Options.
At the Effective Time, each Capri Option with a per share exercise price equal to or in excess of the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be converted automatically into a Tapestry Option to purchase the number of shares of Tapestry common stock equal to the product obtained by multiplying (x) the number of Capri ordinary shares subject to the Capri Option immediately prior to the Effective Time, by (y) the Conversion Ratio, with any fractional shares rounded down to the nearest whole share. Each Tapestry Option will have an exercise price per share of Tapestry common stock equal to (i) the per share exercise price for Capri ordinary shares subject to the corresponding Capri Option immediately prior to the Effective Time divided by (ii) the Conversion Ratio, rounded up to the nearest whole cent. Each Tapestry Option will otherwise be subject to the same terms and conditions applicable to the corresponding Capri Option under the applicable Capri equity plan and award agreements, including vesting terms and terms related to the treatment upon termination of employment.
At the Effective Time, each Capri Option with a per share exercise price that is less than the Merger Consideration and that is outstanding and unexercised immediately prior to the Effective Time will be cancelled, with the holder of such Capri Option becoming entitled to receive an amount in cash equal to the product obtained by multiplying (i) the number of Capri ordinary shares subject to such Capri Option as of immediately prior to the Effective Time, by (ii) the excess of the Merger Consideration over the per share exercise price applicable to the Capri Option.
Capri RSUs.
At the Effective Time, (i) each Capri RSU that is outstanding immediately prior to the Effective Time and that is held by a non-employee director or named executive officer of Capri will vest as of the Effective Time and will be cancelled, with the holder of such Capri RSU becoming entitled to receive the Merger Consideration in respect of each Capri ordinary share subject to such Capri RSU immediately prior to the Effective Time, and (ii) each Capri RSU (other than any Capri RSU covered by the preceding clause (i)) that is outstanding immediately prior to the Effective Time will be converted automatically into a Tapestry RSU equal to the product obtained by multiplying (i) the total number of Capri ordinary shares subject to the Capri RSU immediately prior to the Effective Time by (ii) the Conversion Ratio, with any fractional shares rounded to the nearest whole share. Each Tapestry RSU shall otherwise be subject to the same terms and conditions applicable to the corresponding Capri RSU under the applicable Capri equity plan and award agreements, including vesting terms and terms related to the treatment upon termination of employment.
Capri PSUs.
At the Effective Time, each Capri PSU that is outstanding immediately prior to the Effective Time will fully vest and be cancelled in consideration for the right to receive the Merger Consideration with respect to the number of Capri ordinary shares equal to the number of Capri ordinary shares subject to such Capri PSU immediately prior to the Effective Time (with such number of Capri ordinary shares determined based on (i) actual performance as determined by the Compensation Committee for any fully completed measurement period or performance period, as applicable, ended prior to the Effective Time to the extent the Compensation Committee can reasonably determine
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the level of achievement of performance for such completed measurement period or performance period, as applicable, prior to the Effective Time, and (ii) target performance for any measurement period or performance period, as applicable, for which performance has not previously been determined).
Exchange and Payment Procedures
At or prior to the Effective Time, Tapestry will deposit (or cause to be deposited) with a national or international bank or trust company reasonably acceptable to Capri to act as the exchange agent in connection with the Merger (which we refer to as the “Exchange Agent”), in trust for the sole benefit of holders of the Capri ordinary shares, cash in U.S. dollars sufficient to pay the aggregate Merger Consideration in exchange for all of the Capri ordinary shares outstanding immediately prior to the Effective Time (other than Cancelled Shares or Dissenting Shares), payable upon due surrender of the certificates that, immediately prior to the Effective Time, represented Capri ordinary shares (or affidavits of loss in lieu thereof and, if reasonably required by Tapestry, an indemnity bond) or noncertificated shares of ordinary shares represented by book-entry (which cash fund we refer to as the “Exchange Fund”). In the event that the Exchange Fund has insufficient funds to pay the Merger Consideration, Tapestry will promptly deposit additional funds with the Exchange Agent in an amount that is equal to the shortfall that is required to make such payment.
Within two business days following the Effective Time, Tapestry will cause the Exchange Agent to mail to each holder of record of certificates representing Capri ordinary shares whose shares were converted into the right to receive the Merger Consideration, (a) a letter of transmittal, and (b) customary instructions for effecting the surrender of certificates (or affidavits of loss in lieu thereof and, if reasonably required by Tapestry, an indemnity bond) in exchange for the Merger Consideration. Upon surrender of certificates (or affidavits of loss in lieu thereof and, if reasonably required by Tapestry, an indemnity bond) for cancellation to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such certificates will be entitled to receive in exchange therefor an amount in cash equal to the product of (i) the number of Capri ordinary shares represented by such holder’s properly surrendered certificates (or affidavits of loss in lieu thereof and, if reasonably required by Tapestry, an indemnity bond) and (ii) the Merger Consideration. No interest will be paid or accrued on any amount payable upon due surrender of certificates (or affidavits of loss in lieu thereof and, if reasonably required by Tapestry, an indemnity bond). If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered certificate is registered, then it will be a condition precedent to payment that (A) the certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and (B) the person requesting such payment shall have paid any transfer, documentary, sales, use, stamp, registration and other such taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the certificate surrendered or shall have established to the satisfaction of Tapestry that such tax either has been paid or is not required to be paid. In the case that any certificate of Capri ordinary shares has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the holder thereof and, if reasonably required by Tapestry, an indemnity bond, the Exchange Agent will issue in exchange for such lost, stolen or destroyed certificate, the applicable Merger Consideration payable.
Holders of book-entry shares will not be required to deliver a certificate or an executed letter of transmittal to the Exchange Agent to receive the Merger Consideration. In lieu thereof, each such registered holder will automatically be entitled to receive, and Tapestry will cause the Exchange Agent to pay and deliver within two business days following the Effective Time, the applicable Merger Consideration for each Capri ordinary share formerly represented by such book-entry share, and the exchanged book-entry share will be cancelled. Payment of the Merger Consideration with respect to book-entry shares will only be made to the person in whose name such book-entry shares are registered.
Any portion of the Exchange Fund (including the proceeds of any investments thereof) that remains undistributed to the former holders of Capri ordinary shares that have been converted into the right to receive the Merger Consideration on the first anniversary of the Effective Time will thereafter be delivered to Tapestry upon demand, and any former holders of such shares must thereafter look only to Tapestry (subject to abandoned property, escheat or similar laws) as general creditors thereof with respect to the applicable Merger Consideration payable upon due surrender of their certificates, without any interest thereon.
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Withholding
The Exchange Agent, Capri, the Surviving Company, Tapestry and Merger Sub, as applicable, (without duplication) will be entitled to deduct and withhold from amounts otherwise payable pursuant to the Merger Agreement any amounts as are required to be withheld or deducted with respect to such payment under the Code, or any other applicable state, local or non-U.S. law. To the extent that amounts are so deducted or withheld, (a) such deducted or withheld amounts will be remitted to the appropriate governmental entity in accordance with applicable law and (b) any such deducted or withheld amounts so remitted shall be treated for all purposes of the Merger Agreement as having been paid to the person in respect of which such deduction or withholding was made. If Tapestry or Merger Sub determines that it or any of its affiliates, permitted successors or assigns is required to deduct or withhold any amount from any payment under the Merger Agreement (other than any backup withholding under Section 3406 of the Code (or a similar provision of state, local or foreign law) or any withholding in respect of Capri equity awards covered by the Merger Agreement) or in connection with the transactions contemplated by the Merger Agreement, then Tapestry or Merger Sub, as applicable, will provide notice to Capri of the intent to deduct or withhold such amount and the basis for such deduction or withholding as promptly as reasonably practicable, and the parties shall, and shall cause their applicable affiliates, permitted successors and assigns to, reasonably cooperate with one another in order to eliminate or reduce any such deduction or withholding, including providing a reasonable opportunity for the applicable payee to provide forms or other evidence that would mitigate, reduce or eliminate such deduction or withholding.
Representations and Warranties
The Merger Agreement contains representations and warranties of Capri, Tapestry and Merger Sub.
Some of the representations and warranties in the Merger Agreement made by Capri are qualified as to materiality or Material Adverse Effect. For purposes of the Merger Agreement, “Material Adverse Effect” when used with reference to Capri means a change, effect, development, circumstance, condition, state of facts, event or occurrence that has, or would reasonably be expected to have, individually or in the aggregate, a material adverse effect on the financial condition, business or operations of Capri and its subsidiaries, taken as a whole, but does not include changes, effects, developments, circumstances, conditions, states of facts, events or occurrences to the extent resulting or arising from the following matters:
any changes in United States, regional, global or international economic conditions, including any changes affecting financial, credit, foreign exchange or capital market conditions;
any changes in conditions in the industry in which Capri and its subsidiaries operate;
any changes in political, geopolitical, regulatory or legislative conditions in the United States or any other country or region of the world;
any changes after the date of the Merger Agreement in GAAP or the interpretation thereof;
any changes after the date of the Merger Agreement in applicable law or the interpretation thereof;
any failure by Capri to meet any internal or published projections, estimates or expectations of its revenue, earnings or other financial performance or results of operations for any period, in and of itself (provided that the facts or occurrences giving rise or contributing to such failure that are not otherwise excluded from this definition of a Material Adverse Effect may be taken into account);
any acts of terrorism or sabotage, war (whether or not declared, including the conflict between the Russian Federation and Ukraine), the commencement, continuation or escalation of a war, acts of armed hostility, weather conditions, natural disasters, epidemics or pandemics or other force majeure events, including any material worsening of such conditions threatened or existing as of the date of the Merger Agreement;
the execution and delivery of the Merger Agreement, the identity of Tapestry or any of its subsidiaries the pendency or consummation of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, or the public announcement of the Merger Agreement or the other transactions contemplated by the Merger Agreement;
any action or failure to take any action which action or failure to act is requested or consented to in writing by Tapestry or otherwise expressly required by the Merger Agreement; and
any breach by Tapestry or any of its affiliates of the Merger Agreement;
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provided that in the case of the matters in the first, second and seventh bullets, to the extent that such event, change, occurrence or development referred to therein has had a disproportionate adverse impact on Capri or any of its subsidiaries, relative to other companies operating in the business in which Capri and its subsidiaries operate, then only the incremental disproportionate adverse effect of such change, effect, development, circumstance, condition, state of facts, event or occurrence shall be taken into account for the purpose of determining whether a Material Adverse Effect exists or has occurred.
Material Adverse Effect when used with respect to Capri also includes any change, effect, development, circumstance, condition, state of facts, event or occurrence that prevents or materially impairs the ability of Capri to consummate the transactions contemplated by the Merger Agreement, including the Merger, prior to the Outside Date.
In the Merger Agreement, Capri has made representations and warranties to Tapestry and Merger Sub that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement and Capri’s confidential disclosure letter. These representations and warranties relate to, among other things:
due organization, valid existence and good standing and authority and qualification to conduct business with respect to Capri and its subsidiaries;
the capital structure of Capri;
Capri’s corporate power and authority to enter into and perform the Merger Agreement;
the Capri Board of Directors’ recommendation in favor of the Merger;
governmental authorizations and permits;
required consents, approvals and regulatory filings in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement and performance thereof;
the absence of, as a result of the performance of and compliance with the Merger Agreement and consummation of the Merger and other transactions contemplated by the Merger Agreement, any default or violation (or similar event) with respect to certain material contracts, Capri’s organizational documents and applicable laws;
Capri’s SEC filings, financial statements and internal controls over financial reporting;
the absence of specified undisclosed liabilities;
the absence of a Material Adverse Effect or any actions outside the ordinary course from April 1, 2023 through the date of the Merger Agreement;
compliance with laws, including compliance with applicable anti-corruption, anti-bribery and export and import laws and the rules and regulations of the NYSE;
certain employee and labor matters;
certain tax matters;
legal proceedings and orders;
certain matters relating to patents, trademarks, domain names, copyrights, trade secrets, software and other intellectual property, including data security and privacy;
certain real property owned or leased by Capri and its subsidiaries;
the existence and enforceability of specified categories of certain of Capri’s and its subsidiaries’ material contracts, and the absence of any breach or default under the terms thereof or occurrence of an event that would constitute a default thereunder;
certain environmental matters;
Capri’s and its subsidiaries’ top customers and suppliers;
certain insurance matters;
information included or incorporated by reference into this proxy statement;
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the rendering of Barclays’s opinion to the Board of Directors;
the inapplicability of anti-takeover statutes to the Merger Agreement, the Merger or other transactions contemplated by the Merger Agreement;
the absence of any shareholder rights plan, “poison pill” or other comparable agreement with respect to acquiring control of Capri;
the absence of certain related party transactions, agreements or understandings between Capri and its subsidiaries and any affiliate thereof; and
broker, finder and investment banker fees.
In the Merger Agreement, Tapestry and Merger Sub have made representations and warranties to Capri that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement and Tapestry’s confidential disclosure letter. These representations and warranties relate to, among other things:
due organization, valid existence, and good standing and authority with respect to Tapestry and Merger Sub;
Tapestry’s and Merger Sub’s corporate power and authority to enter into and perform the Merger Agreement;
required consents, approvals and regulatory filings in connection with the Merger Agreement and the Merger and other transactions contemplated by the Merger Agreement and performance thereof;
the corporate approvals necessary for the Merger to be consummated;
the absence of, as a result of the performance of and compliance with the Merger Agreement and consummation of the Merger and other transactions contemplated by the Merger Agreement, any default or violation (or similar event) with respect to certain material contracts, Tapestry’s organizational documents and applicable laws;
the absence of certain legal proceedings or orders;
information supplied by or on behalf of Tapestry or its affiliates for inclusion in this proxy statement;
delivery and enforceability of the debt-financing commitment letter entered into by Tapestry and certain lenders in connection with the Merger Agreement;
the commitments to provide financing to Tapestry, the availability of Tapestry’s financing and sufficiency of funds, to pay the amounts required under the Merger Agreement;
broker, finder and investment banker fees;
the absence of ownership of Capri’s ordinary shares by Tapestry and its subsidiaries;
the absence of any activity or obligations, other than in connection with the Merger Agreement and the transactions contemplated thereunder, of Merger Sub; and
the solvency of Tapestry and its subsidiaries following the Closing.
The representations and warranties contained in the Merger Agreement will not survive the consummation of the Merger.
Conduct of Business Pending the Merger
During the period commencing on the date of the Merger Agreement and ending as of the earlier of the Effective Time or the valid termination of the Merger Agreement pursuant to the Merger Agreement (which we refer to as the “Pre-Closing Period”), except (a) as set forth in the Capri disclosure letter, (b) as specifically permitted or required by the Merger Agreement, (c) as required by applicable law, or (d) as consented to in writing by Tapestry (which consent may not be unreasonably withheld, conditioned or delayed), Capri will, and will cause its subsidiaries to, use reasonable best efforts to:
conduct its business in all material respects in the ordinary course of business; and
preserve intact its and their present business organizations, goodwill and ongoing businesses and preserve its and their relationships with material customers, suppliers, vendors, licensors and licensees.
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During the Pre-Closing Period, and except (a) as set forth in the Capri disclosure letter, (b) as specifically permitted or required by the Merger Agreement, (c) as required by applicable law, or (d) as consented to in writing by Tapestry (which consent may not be unreasonably withheld, conditioned or delayed), Capri will not, and will not permit any of its subsidiaries to, directly or indirectly:
amend, modify, waive, rescind, change or otherwise restate Capri’s or any of its subsidiaries’ organizational documents in a manner that would reasonably be expected to be material to Capri or any of its subsidiaries;
authorize, declare, set aside, make or pay any dividends on or make any distribution with respect to its outstanding ordinary shares or other equity interests (whether in cash, assets, shares or other securities of Capri or any subsidiary) (other than dividends or distributions made by any wholly owned subsidiary to Capri or any wholly owned subsidiary), or enter into any agreement and arrangement with respect to voting or registration, or file any registration statement (other than any Form S-8 or Form S-3) with the SEC with respect to any, of its ordinary shares or other equity interests or securities;
issue new equity interests or convertible securities or combine, divide, reduce or reclassify (or repurchase, redeem or otherwise acquire) any of its equity interests, including convertible securities;
issue, deliver, grant, sell, pledge, dispose of or encumber, or authorize the issuance, delivery, grant, sale, pledge, disposition or encumbrance of, any shares, voting securities or other equity interest in Capri or any of its subsidiaries or any securities convertible into or exchangeable or exercisable for any such shares, voting securities or equity interest, or any rights, warrants or options to acquire any such shares, voting securities or equity interest or any “phantom” shares, “phantom” share rights, share appreciation rights or share based performance units, including without limitation any Capri equity award under the Capri equity plan (except as otherwise provided by the terms of the equity award), other than (A) issuances of Capri’s ordinary shares in respect of any exercise, vesting or settlement, as applicable, of equity awards in accordance with their respective terms, (B) withholding or sales of Capri ordinary shares pursuant to the exercise of options granted under Capri’s equity plan or pursuant to the settlement of equity awards in order to satisfy payment of the exercise price of options granted under Capri’s equity plan or for withholding taxes, (C) transactions solely between Capri and a wholly owned subsidiary or solely between wholly owned subsidiaries, or (D) as expressly permitted pursuant to the bullet directly below;
except as required by any of Capri’s benefit plans as in existence as of the date of the Merger Agreement or any collective bargaining agreement or other agreement with a union, (A) increase the compensation or benefits payable or to become payable to any current or former directors, individual consultants who are natural persons or employees of Capri or any of its subsidiaries, other than increases in annual base compensation (whether salary, wage rates or fees) in the ordinary course of business consistent with past practice for individuals who are not “Specified Employees” (meaning an employee (a) with annual base compensation in excess of $500,000, (b) who is an executive officer under Rule 3b-7 promulgated under the Exchange Act, or (c) who is the chief executive officer of Michael Kors, Jimmy Choo or Versace, or has a title of president), provided that the aggregate budgeted amount of such increases shall not increase by more than four percent (4%) of the aggregate budgeted amount of such compensation as in effect as of the date hereof with respect to such employees, (B) enter into any collective bargaining agreement or other contract with a union, or recognize any union or other employee representative group or labor organization as the representative of any of the employees of Capri or any of its subsidiaries, (C) establish, adopt, enter into, materially amend or terminate any Capri benefit plan or any plan or arrangement which would be a Capri benefit plan if in effect as of the date hereof (including any employment, severance, incentive, change in control or retention arrangement), other than any such actions that are in the ordinary course of business consistent with past practice, and, with respect to Capri benefit plans providing health, dental, vision or other medical benefits, would not increase costs to Capri or any of its subsidiaries under such existing Capri benefit plans by more than four percent (4%) of the aggregate costs of providing benefits under such Capri benefit plans in effect as of the date hereof to Capri and its subsidiaries (and, for the avoidance of doubt, excluding any increases in costs resulting from ordinary course market rate increase or healthcare cost trends in the applicable jurisdictions), (D) take any action to amend or waive any performance or vesting criteria or accelerate vesting, exercisability or funding of any Capri equity award or under any Capri benefit plan, (E) terminate the employment of any Specified Employee, other than for cause, (F) hire any new
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employee who would be a Specified Employee, (G) provide any funding for any rabbi trust or similar arrangement, or (H) expressly waive any confidentiality, non-compete, non-solicit or other material restrictive covenant agreement of any current or former directors, individual consultants or employees of Capri or any of its subsidiaries;
acquire or agree to acquire any equity interests in or assets, real property, personal property or equipment of any person or any business or division thereof, or otherwise engage in any mergers, consolidations or business combinations, except for (A) transactions solely between Capri and a wholly owned subsidiary or solely between wholly owned subsidiaries, (B) acquisitions of assets, personal property or equipment in the ordinary course of business or (C) acquisitions that are not in excess of $2,000,000 individually or $10,000,000 in the aggregate;
liquidate (completely or partially), dissolve, restructure, recapitalize or effect any other reorganization (excluding any restructuring, recapitalization or reorganization solely between or among any of Capri and/or its subsidiaries), or adopt any plan or resolution providing for any of the foregoing, excluding the liquidation or dissolving of any inactive or de minimis subsidiaries;
make any loans, advances or capital contributions to, or investments in, any other person, except for (A) any such transactions solely among Capri and its wholly owned subsidiaries or solely among Capri’s wholly owned subsidiaries, (B) advances for reimbursable employee expenses in the ordinary course of business or (C) loans, advances, capital contributions or investments that are not in excess of $2,000,000 individually or $10,000,000 in the aggregate;
other than in accordance with contracts in effect on the date of the Merger Agreement, sell, lease, assign, abandon, permit to lapse, transfer, exchange, swap or otherwise dispose of, or subject to any lien (other than certain permitted liens, as specified in the Merger Agreement), any of its properties, rights or assets (including shares in the capital of Capri or its subsidiaries) having a value in excess of $2,000,000 individually or $10,000,000 in the aggregate to any person (provided that such values shall not apply to assets constituting intellectual property, provided further that this bullet applies apply only to intellectual property that is material to the business of Capri and its subsidiaries), except (A) dispositions of obsolete, expired or worthless equipment, properties, rights or assets in the ordinary course of business, (B) licenses of Capri’s intellectual property entered into in the ordinary course of business consistent with past practice, (C) pursuant to transactions solely among Capri and its wholly owned subsidiaries or solely among wholly owned subsidiaries, (D) sales and transfers and other dispositions of products and services in the ordinary course of business, (E) leases or subleases entered into in the ordinary course of business (provided that this exception shall not apply to any lease or sublease involving an annual payment of more than $5,000,000), including guarantees in connection with any leases, and (F) dispositions of Capri’s registered intellectual property constituting applications in the ordinary course of prosecution;
enter into any contract that would constitute a Material Contract (as defined in the Merger Agreement), or modify in a manner materially adverse to Capri, amend in a manner materially adverse to Capri or voluntarily terminate any Material Contract (or waive, release or assign any material rights or material claims thereunder);
except in accordance with Capri’s capital budget set forth in Capri’s disclosure letter, make any capital expenditure or expenditures, enter into agreements or arrangements providing for capital expenditure or expenditures or otherwise commit to do so, except for variations of up to 10% of such budget in the aggregate during any specified period;
commence (other than in the ordinary course of business), waive, release, assign, compromise or settle any claim, litigation, investigation or proceeding or any claim, litigation or proceeding that is not brought by a governmental entity and that: (A) is for an amount not to exceed, for any such compromise or settlement, $1,000,000, individually, or $5,000,000, in the aggregate (in either case, in excess of any amounts covered by insurance) and (B) does not impose any injunctive relief on Capri and its subsidiaries and does not involve the admission of wrongdoing by Capri, any of its subsidiaries or any of their respective officers or directors;
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make any material change in financial accounting policies, practices, principles or procedures or any of its methods of reporting income, deductions or other material items for financial accounting purposes, except as required by GAAP or applicable law;
amend or modify in any material respect any of Capri’s or its subsidiaries’ published privacy policies, written statements and published notices regarding personal data, other than in the ordinary course of business consistent with past practice or as reasonably necessary to comply with a data privacy obligation arising from information privacy and security laws, the Payment Card Industry Data Security Standard, Capri’s privacy statements and policies, contracts, and consents and authorizations that apply to personal data obtained by Capri or its subsidiaries;
(A) change or revoke any material tax election or adopt or change any material tax accounting period or material method of tax accounting, in the case of this clause (A), other than in the ordinary course of business or in a manner consistent with past practice (provided that it is agreed and understood that an entity classification election pursuant to Treasury Regulation Section 301.7701-3 shall be treated as not being made in the ordinary course of business or in a manner consistent with past practice), (B) settle or compromise any material liability for taxes or any tax audit, claim or other proceeding relating to a material amount of taxes for an amount materially in excess of the amount reserved for the taxes subject to such proceeding on the financial statements of Capri, (C) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of state, local or non-U.S. law) with respect to material taxes, (D) amend any material tax returns (other than any amendments that would not reasonably be expected to result in a material increase to the tax liability of Capri, Capri’s subsidiaries or Tapestry or its affiliates) or file any material tax return that is materially inconsistent with past practice, if any, with respect to filing tax returns of the same type for a prior taxable period, (E) surrender any right to claim a material refund of taxes other than in the ordinary course of business, or (F) with respect to any subsidiary of Capri (I) that is treated as a foreign corporation for U.S. federal income tax purposes and (II) equity interests (meeting the requirements of Section 1504(a)(2) of the Code) of which are owned, for U.S. federal income tax purposes, by one or more of any of Capri and Capri’s subsidiaries that are part of an “Affiliated Group” within the meaning of Section 338(h)(5) of the Code, cause (x) such subsidiary not to meet the requirements set forth in clause (I) and (II) or (y) any “United States person” within the meaning of Section 7701(a)(30) of the Code (excluding any shareholder of Capri) to own (within the meaning of Section 958(a) of the Code), or to be considered as owning by applying the rules of ownership of Section 958(b) of the Code, equity interests (or additional equity interests, as relevant) of such subsidiary;
incur, assume, endorse, guarantee or otherwise become liable for or modify in any material respects the terms of any Indebtedness (as defined in the Merger Agreement) for borrowed money, issue or sell any debt securities or calls, options, warrants or other rights to acquire any debt securities (directly, contingently or otherwise) or enter into any swap, forward, futures or hedging transaction or other derivative agreements (or amend or modify any such transaction or agreement), except for (A) any Indebtedness solely among Capri and its wholly owned subsidiaries or solely among wholly owned subsidiaries, (B) guarantees by Capri of Indebtedness for borrowed money of its subsidiaries or guarantees by Capri’s subsidiaries of Indebtedness for borrowed money of Capri or any of its subsidiaries, which Indebtedness is incurred in compliance with this bullet or is outstanding on the date of the Merger Agreement, (C) refinancings, replacements or amendments on market standard terms of Indebtedness incurred pursuant to agreements entered into by Capri or any of its subsidiaries in effect prior to the execution of the Merger Agreement (including the refinancing of Capri’s $450,000,000 notes due November 2024), provided that only existing Indebtedness with a maturity date within eighteen (18) months of the date of the Merger Agreement may be refinanced or replaced pursuant to this clause (C) above, provided further, that such refinanced Indebtedness does not become due in connection with the Merger or does not include material prepayment penalties, and (D) drawing on Capri’s Revolving Credit Agreement, dated as of July 1, 2022, as it exists on the date of the Merger Agreement, without giving effect to any expansion or accordion feature, in the ordinary course of business or in order to repay existing Indebtedness if so repaying is commercially reasonable;
enter into any transactions or contracts with any affiliate or other person that would be required to be disclosed by Capri under Item 404 of Regulation S-K of the SEC, except in the ordinary course of business;
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fail in any material respect to maintain Capri’s material insurance policies or comparable replacement policies with respect to the material assets, operations and activities of Capri and its subsidiaries;
acquire any material real property or modify in a manner materially adverse to Capri or amend in a manner materially adverse to Capri or exercise any right to renew any material lease, in each case, other than in the ordinary course of business and with respect to any lease with payments per annum from Capri less than $5,000,000; provided that entry into such lease must be consistent with Capri’s capital budget provided in Capri’s disclosure letter;
other than the shareholder meeting being held for the purpose of seeking approval of the Merger Agreement (the “Capri Shareholders Meeting”) or as required by Capri’s governing documents or by applicable law, convene any special meeting (or any adjournment or postponement thereof) of shareholders;
adopt or otherwise implement any shareholder rights plan, “poison-pill” or other comparable agreement;
enter into any material new line of business outside the businesses being conducted by Capri and its subsidiaries on the date of the Merger Agreement (excluding planned extensions as of the date of the Merger Agreement and retail marketing initiatives);
except as expressly provided for in any contracts entered into between Capri and any of its subsidiaries and any third party prior to the date of the Merger Agreement, open or commit to open any new stores or similar retail location or close any stores or similar retail location, unless in any case, such store opening, commitment or closing is in the ordinary course of business and involves an annual payment less than $5,000,000; provided that any such store opening or commitment must be consistent with Capri’s capital budget provided in Capri’s disclosure letter;
materially deviate from the ordinary course inventory and distribution management practices (by brand or by distribution channel) of Capri or any of its subsidiaries;
terminate, modify, or waive in any material respect any right under any material permit;
make any distribution or contribution with respect to cash or other assets of the Versace Foundation, the Jimmy Choo Foundation and the Capri Holdings Foundation for the Advancement in Diversity in Fashion, other than distributions not in excess of five percentage points above the minimum annual distributions (i.e., 10% in total) under the Code; or
agree or authorize, in writing or otherwise, to take any of the foregoing actions.
Non-Solicitation Covenant
During the Pre-Closing Period, Capri has agreed that it will not, and will cause its controlled affiliates and all of its directors and officers and any of their other respective representatives acting on their behalf, not to, directly or indirectly:
solicit, initiate or knowingly encourage or knowingly facilitate any inquiry, proposal or offer, or the making, submission or announcement of any inquiry, proposal or offer which constitutes or would reasonably be expected to lead to an Acquisition Proposal (as defined below in this section of this proxy statement);
participate in any negotiations regarding, or furnish to any person any information relating to Capri or any of its subsidiaries in connection with an Acquisition Proposal;
adopt, approve, endorse or recommend, or propose to adopt, approve, endorse or recommend, any Acquisition Proposal;
withdraw, change, amend or modify, or otherwise propose to withdraw, change, amend or modify, in a manner adverse to Tapestry, the Board’s recommendation in favor of Capri shareholders adopting a resolution authorizing the Merger Agreement and the plan of merger and approving the Merger and the other transactions contemplated by the Merger Agreement (which we refer to as the “Capri Board Recommendation”);
if an Acquisition Proposal has been publicly disclosed, fail to publicly recommend against any such Acquisition Proposal within 10 business days after the public disclosure of such Acquisition Proposal (or
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subsequently withdraw, change, amend, modify or qualify, in a manner adverse to Tapestry, such rejection of such Acquisition Proposal) and reaffirm the Capri Board Recommendation within such 10 business day period (or, if earlier, by the second business day prior to the date of the Special Meeting);
fail to include the Capri Board Recommendation in this proxy statement;
approve, or authorize, or cause or permit Capri or any of its subsidiaries to enter into, any merger agreement, acquisition agreement, reorganization agreement, letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, partnership agreement or similar agreement with respect to any Acquisition Proposal (other than certain permitted confidentiality agreements);
call or convene a meeting of Capri’s shareholders to consider a proposal that would reasonably be expected to materially impair, prevent or delay the consummation of the transactions contemplated by the Merger Agreement; or
resolve or agree to do any of the foregoing.
Capri has agreed that it will, and will cause its controlled affiliates and its directors and officers and any of their other respective representatives acting on their behalf to, cease any activities occurring prior to the date of the Merger Agreement with respect to any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, an Acquisition Proposal. Capri agreed to promptly (and in any event within two business days following the date of the Merger Agreement) (A) request in writing that each person that had executed a confidentiality agreement in connection with its consideration of an Acquisition Proposal promptly destroy or return to Capri all nonpublic information that was furnished by Capri or any of its Representatives to such person or any of its representatives and (B) terminate access to any physical or electronic data rooms relating to an acquisition of Capri or any portion thereof by such person and its representatives.
“Acquisition Proposal” means any offer, proposal or indication of interest from a person (other than a proposal or offer by Tapestry or any of its subsidiaries) at any time relating to any transaction or series of related transactions (other than the transactions contemplated by the Merger Agreement) involving: (a) any acquisition or purchase by any person, directly or indirectly, of more than 20% of any class of outstanding voting or equity securities of Capri (whether by voting power or number of shares), or any tender offer (including a self-tender offer) or exchange offer that, if consummated, would result in any person beneficially owning more than 20% of any class of outstanding voting or equity securities of Capri (whether by voting power or number of shares); (b) any merger, consolidation, share exchange, business combination, joint venture, recapitalization, reorganization or other similar transaction involving Capri and a person pursuant to which the shareholders of Capri immediately preceding such transaction hold less than 80% of the equity interests in the surviving, resulting or ultimate parent entity of such transaction (whether by voting power or number of shares); or (c) any sale, lease, exchange, transfer or other disposition to a person of more than 20% of the consolidated assets of Capri and its subsidiaries (measured by the fair market value thereof).
“Superior Proposal” means a bona fide, written Acquisition Proposal (with references in the definition thereof to 20% and 80% being deemed to be replaced with references to 50%) by a third party, which the Capri board determines in good faith after consultation with Capri’s outside legal counsel and financial advisors to be more favorable to the Capri shareholders than the Merger, taking into account all relevant factors and any changes to the terms of the Merger Agreement proposed by Tapestry; provided, however, that any offer, proposal or indication of interest involving the sale or disposition of any of the Michael Kors, Versace or Jimmy Choo brands individually or in a combination of two does not constitute an Acquisition Proposal for purposes of this definition.
The Board of Directors’ Recommendation; Change of Recommendation
As described in this proxy statement, and subject to the provisions described below, the Capri board has made the recommendation that the Capri shareholders adopt a resolution authorizing the Merger Agreement and the plan of merger and approving the Merger and the other transactions contemplated by the Merger Agreement. The Merger Agreement provides that the Capri board will not effect a Change of Recommendation (as defined below in this section of this proxy statement), except as described below.
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Capri has agreed that the Capri board, including any committee thereof, will not:
adopt, approve, endorse or recommend, or propose to adopt, approve, endorse or recommend, any Acquisition Proposal;
withdraw, change, amend or modify, or otherwise propose to withdraw, change, amend or modify, in a manner adverse to Tapestry, the Capri Board Recommendation;
if an Acquisition Proposal has been publicly disclosed, fail to publicly recommend against any such Acquisition Proposal within 10 business days after the public disclosure of such Acquisition Proposal (or subsequently withdraw, change, amend, modify or qualify, in a manner adverse to Tapestry, such rejection of such Acquisition Proposal) and reaffirm the Capri Board Recommendation within such 10 business day period (or, if earlier, by the second business day prior to the Capri Shareholders Meeting);
fail to include the Capri Board Recommendation in this proxy statement;
approve, or authorize, or cause or permit Capri or any of its subsidiaries to enter into, any merger agreement, acquisition agreement, reorganization agreement, letter of intent, memorandum of understanding, agreement in principle, option agreement, joint venture agreement, partnership agreement or similar agreement with respect to any Acquisition Proposal (other than certain permitted confidentiality agreements) (we refer to any of the foregoing actions as a “Change of Recommendation”).
However, at any time prior to Capri shareholders adopting a resolution authorizing the Merger Agreement and the plan of merger and approving the Merger and the other transactions contemplated by the Merger Agreement, if the Capri board determines in good faith after consultation with its outside counsel that an Acquisition Proposal constitutes a Superior Proposal and that the failure to take actions as described below would be reasonably likely to violate the directors’ fiduciary or statutory duties under applicable law, Capri’s Board may:
make a Change of Recommendation in response to an Intervening Event (as defined below) if Capri’s Board has determined in good faith after consultation with its outside legal counsel and financial advisor, that the failure to take such action would be reasonably likely to violate the directors’ fiduciary or statutory duties under applicable law;
make a Change of Recommendation and/or cause Capri to terminate the Merger Agreement in accordance with its terms, in order to enter into an acquisition agreement for an Acquisition Proposal received after the date of the Merger Agreement that did not result from a non-de minimis breach of its terms.
Capri has agreed to provide Tapestry with three business days’ written notice prior to taking any action permitted under the first bullet point above, advising Tapestry that Capri’s Board intends to change the Capri Board Recommendation and specifying the reasons therefor. During the three business day period, Capri and its representatives will negotiate in good faith (if desired by Tapestry) any proposal by Tapestry to amend the terms of the Merger Agreement in a manner that would obviate the need to change the Capri Board Recommendation. Capri has also agreed to provide Tapestry with three business days’ written notice that it intends to take action permitted under the second bullet point above and specifying the material terms of the Acquisition Proposal, including a copy of any proposed definitive documentation. During the three business day period, Capri and its representatives will negotiate in good faith (if desired by Tapestry) any proposal by Tapestry to amend the terms of the Merger Agreement in a manner that the Acquisition Proposal would no longer constitute a Superior Proposal. If there are any material amendments, revisions or changes to the terms of a Superior Proposal, Capri must notify Tapestry, and the applicable three business day period will be extended at least two additional business days after notice of each revision. At the end of the three business day period, the Board of Directors must again make the determination in good faith after consultation with its outside counsel that an Acquisition Proposal constitutes a Superior Proposal and that the failure to take actions as described below would be reasonably likely to violate the directors’ fiduciary or statutory duties under applicable law (after in good faith taking into account the amendments proposed by Tapestry), to make a Change of Recommendation.
Nothing in the Merger Agreement will prevent the Board of Directors from complying with its disclosure obligations under applicable law or rules and policies of NYSE or from issuing a “stop, look and listen” statement pending disclosure of its position thereunder.
“Intervening Event” means any change, effect, development, circumstance, condition, state of facts, event or occurrence that (a) is neither known by, nor reasonably foreseeable (with respect to magnitude or material
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consequences) by Capri or the Capri board as of or prior to the date of the Merger Agreement and (b) first occurs, arises or becomes known to Capri or the Capri board after the entry into the Merger Agreement and prior to obtaining the Capri Shareholder Approval, subject to certain limited exceptions set forth in the Merger Agreement.
Employee Matters
Effective as of the Effective Time and for a period of 12 months thereafter (which we refer to as the “Continuation Period”), Tapestry will provide or cause to be provided to each employee of Capri and its subsidiaries who continues to be employed by Tapestry or any of its subsidiaries (each of whom we refer to as a “Continuing Employee”):
a base salary or hourly wage rate and short-term (annual or more frequent) cash bonus or commission opportunities that are no less favorable in the aggregate than the base salary or hourly wage rate and short-term (annual or more frequent) cash bonus or commission opportunities, as applicable, as than were provided to such Continuing Employee immediately prior to the Effective Time, provided that during the Continuation Period, Tapestry will provide or cause to be provided to such Continuing Employee a base salary or hourly wage rate, as applicable, that is no less favorable than that provided to such Continuing Employee immediately prior to the Effective Time;
long-term incentive compensation opportunities that are no less favorable than the long-term incentive compensation opportunities provided to such Continuing Employee immediately prior to the Effective Time, provided that in lieu of equity or equity-based compensation, Tapestry may elect to substitute cash incentive compensation of equivalent value; and
benefits (excluding retention, change in control, defined benefit pension and post-retirement welfare payments or benefits) that are no less favorable in the aggregate to such Continuing Employee than those provided to similarly situated employees of Tapestry or its subsidiaries, provided that providing for such Continuing Employee to continue to participate in the Capri benefit plans as in effect immediately prior to the Effective Time shall satisfy this prong, and provided further that during the Continuation Period, the medical, dental, vision and other health benefits provided to such Continuing Employee shall be no less favorable in the aggregate than those provided to such Continuing Employee immediately prior to the Effective Time.
In addition, Tapestry will provide or cause to be provided to each Continuing Employee whose employment is terminated by Tapestry, Capri or any subsidiary of Capri other than for cause during the one-year period following the Effective Time the severance payments and benefits as set forth in the confidential disclosure schedules to the Merger Agreement, or such greater benefits as may be required by applicable law or any collective bargaining or similar agreement with a union.
Tapestry will, or will cause Capri and its subsidiaries to, honor all Capri benefit plans in accordance with their terms as in effect prior to the Effective Time, including Capri’s retention program providing for retention payments to certain individuals as set forth in the confidential disclosure schedules to the Merger Agreement. Following the Effective Time, Tapestry, Capri or one of its subsidiaries will pay or cause to be paid such retention payments pursuant to the terms of the retention program.
Tapestry agrees to, and agrees to cause Capri and its subsidiaries to, pay bonuses to Continuing Employees under Capri’s annual incentive plan in respect of the fiscal year in which the Effective Time occurs in an amount equal to the annual incentive award earned by such Continuing Employee based on the actual level of performance for the applicable fiscal year through the latest practicable date prior to the Effective Time as determined by the Compensation Committee in good faith and consistent with such annual incentive plan, prorated for the portion of fiscal year in which the Effective Time occurs (which we refer to as the “Prorated Annual Bonuses”). The Prorated Annual Bonuses will be paid by Tapestry, Capri or its subsidiaries at the time or times that the Prorated Annual Bonuses would normally be paid by Capri or its subsidiaries, subject to such Continuing Employee’s continued employment through the date that Prorated Annual Bonuses are paid; provided, however, that any Continuing Employee whose employment is terminated on or following the Closing Date and prior to the Prorated Annual Bonus payment date under circumstances that entitle such employee to severance and/or equity award vesting shall be entitled to receive his or her Prorated Annual Bonus, payable as soon as reasonably practicable following the date of such termination of employment.
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Any Continuing Employees who, at any time during the Continuation Period, are covered by a collective bargaining agreement will be provided with the aforementioned compensation, benefits and terms and conditions of employment in addition to, and not in contravention of, any obligations under the applicable collective bargaining agreement or law.
Tapestry will (a) credit each Continuing Employee’s years of service with Capri and its subsidiaries and their respective predecessors prior to the Effective Time for all purposes under the Tapestry employee benefit plans to the same extent such service was recognized under any similar or comparable Capri employee benefit plan, subject to certain customary exclusions, (b) waive or cause to be waived any preexisting condition exclusions or limitations and actively-at work-requirements for such Continuing Employee and his or her covered dependents to the extent that such exclusions or limitations and waiting periods would not apply under a similar or comparable Capri benefit plan in which such employee participated prior to the Effective Time, and (c) use reasonable best efforts to cause such Continuing Employee to be given credit for all amounts paid under any similar or comparable Capri benefit plan for the plan year that includes the Effective Time for purposes of applying deductibles, copayments and out-of-pocket maximums as though such amounts had been paid in accordance with the terms and conditions of the plans maintained by Tapestry or any of its subsidiaries, as applicable, for the plan year in which the Effective Time occurs.
Furthermore, if, at least thirty (30) business days prior to the Effective Time, Tapestry provides written notice to Capri directing Capri to terminate its 401(k) plan(s), Capri shall terminate any and all 401(k) plans effective as of the day immediately preceding the day on which the Effective Time occurs (which we refer to as the “401(k) Termination Date”). If the Capri 401(k) plan is terminated, then on the Closing Date (such that there is no gap in 401(k) plan participation), Tapestry shall permit all Continuing Employees who were eligible to participate in any of Capri’s 401(k) plan(s) immediately prior to the 401(k) Termination Date to participate in Tapestry’s 401(k) plan and shall permit each such Continuing Employee to elect to transfer his or her account balance when distributed from the terminated Capri 401(k) plan(s), including any outstanding participant loans, to Tapestry’s 401(k) plan.
Debt Financing
Tapestry has agreed to, and to cause each of its subsidiaries to, use reasonable best efforts to take, or cause to be taken, all actions, and do, or cause to be done, all things reasonably necessary or advisable to obtain funds sufficient to fund the Financing Amounts on or prior to the date on which the Merger is required to be consummated pursuant to the terms of the Merger Agreement, which may include the issuance and sale of senior unsecured notes and/or the entry into a committed term loan facility (any such (a) notes that have been funded and are not subject to an escrow arrangement, (b) notes that are subject to an escrow agreement, which shall have conditions to funding not less favorable than those set forth in the Commitment Letter as of the date of the Merger Agreement, and (c) committed term loan facility, which shall have conditions to funding not less favorable than those set forth in the Commitment Letter as of the date of the Merger Agreement, collectively, the “Replacement Financing”). In furtherance and not in limitation of the foregoing, Tapestry has agreed to use reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things reasonably necessary or advisable to obtain the proceeds of the debt financing on the terms and subject only to the conditions described in the Commitment Letter on or prior to the date on which the Merger is required to be consummated pursuant to the terms of the Merger Agreement.
In the event that any portion of the debt financing becomes unavailable (other than due to a reduction in connection with a Replacement Financing), Tapestry has agreed to (i) as promptly as practicable notify Capri in writing of such unavailability and the reason therefor and (ii) unless Tapestry has available sufficient cash on hand or cash from other funding sources pursuant to a Replacement Financing to fund the Financing Amounts, use reasonable best efforts, and cause each of its subsidiaries to use their reasonable best efforts, to arrange and obtain, as reasonably promptly as practicable following the occurrence of such event, alternative financing (on terms and conditions that are not materially less favorable to Tapestry and/or any of its subsidiaries, taken as a whole, than the terms and conditions as set forth in the Commitment Letter, taking into account any “market flex” provisions thereof) for any such unavailable portion from the same or alternative sources (the “Alternative Financing”) in an amount sufficient, when taken together with the available portion of the debt financing, to consummate the transactions contemplated by the Merger Agreement and to pay the Financing Amounts and, without limiting the foregoing, to use reasonable best efforts to cause such Alternative Financing to not include certain prohibited modifications or conditions to the consummation thereof that are more onerous than those set forth in Commitment Letter as of the date the Merger Agreement was executed.
Promptly after obtaining knowledge thereof, Tapestry has agreed to provide Capri with written notice of any actual or threatened breach, default, cancellation, termination or repudiation by any party to the Commitment Letter
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or any definitive agreement and a copy of any written notice or other written communication from any lender or other financing source with respect to any actual or threatened breach, default, cancellation, termination or repudiation by any party to the Commitment Letter or any definitive agreements with respect to the debt financing of any provision thereof and to keep Capri reasonably informed on a timely basis of the status of its efforts to consummate the debt financing, including any Alternative Financing.
In no event will the receipt or availability of any funds or financing (including the debt financing) by or to Tapestry or any of its affiliates or any other financing or other transactions be a condition to any of Tapestry’s obligations under the Merger Agreement.
Cooperation as to Debt Financing
Prior to the Effective Time and subject to the last paragraph of this section of this proxy statement, Capri has agreed to use its reasonable best efforts, to cause its subsidiaries to use their reasonable best efforts, and to cause its and their respective representatives to, provide all customary cooperation and all customary financial information, in each case that is reasonably requested by Tapestry in connection with any financing, including the debt financing, obtained or to be obtained by Tapestry for the purpose of financing the Merger or any transaction undertaken in connection therewith (it being understood that the receipt of any such financing is not a condition to the Merger), including by using reasonable best efforts to:
furnish, or cause to be furnished, certain specified financial information to Tapestry;
cause Capri’s independent accountants, as reasonably requested by Tapestry, to (a) consent to the use of their audit reports on the financial statements of Capri and its subsidiaries in any materials relating to, or any filings made with the SEC related to, such financing, (b) provide, consistent with customary practice, “comfort letters” necessary and reasonably requested by Tapestry, and (c) participate in reasonable and customary due diligence sessions;
assist Tapestry in (including by providing information relating to Capri and its subsidiaries reasonably required and requested by Tapestry in connection with) its preparation of rating agency presentations, road show materials, bank information memoranda, projections, prospectuses, bank syndication materials, credit agreements, offering memoranda, private placement memoranda, definitive financing documents (as well as customary certificates and “backup” support) and similar or related documents to be prepared by Tapestry in connection with such financings;
cooperate with customary marketing efforts of Tapestry for such financing, including using reasonable best efforts to cause its management team, with appropriate seniority and expertise, to assist in preparation for and to participate in a reasonable number of meetings, presentations, road shows, due diligence sessions (including accounting due diligence sessions), drafting sessions, and sessions with rating agencies;
deliver to Tapestry any materials and documentation about Capri and its subsidiaries required under applicable “know your customer” and anti-money laundering laws;
inform Tapestry promptly in writing if Capri (a) concludes that any previously issued financial statement of Capri or any of its subsidiaries included in any materials with respect to such financing should no longer be relied upon as per Item 4.02 of Form 8-K under the Exchange Act or (b) determines a restatement of any of Capri’s or its subsidiaries’ financial statements is required or reasonably likely;
cooperate with respect to the provision of guarantees required by such financing, including by executing and delivering definitive documents related thereto; and
provide customary authorization letters to prospective lenders or investors.
Capri’s obligation to provide such cooperation is subject to specified customary exceptions. Additionally, Tapestry has agreed to reimburse Capri or any of its subsidiaries for all reasonable and documented out-of-pocket costs incurred by them or their respective representatives in connection with such cooperation and has agreed to reimburse, indemnify and hold harmless Capri and its subsidiaries and their respective representatives from and against any and all losses actually suffered or incurred by them in connection with the arrangement of such financing, any action taken by them at the request of Tapestry or its representatives pursuant to the above provisions and any information used in connection therewith, subject to certain customary exceptions.
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Indemnification and Insurance
Tapestry has agreed that for six years from and after the Effective Time, Tapestry will, and will cause the Surviving Company to, indemnify and hold harmless each past and present director, officer and employee of Capri or any of its subsidiaries and each person who served as a director, officer, member, trustee or fiduciary of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise at the request or for the benefit of Capri or any of its subsidiaries (which we refer to collectively as the “Indemnified Parties”) against any costs or expenses incurred in connection with any claim brought in connection with such person serving as an officer, director, employee or other fiduciary of Capri or any of its subsidiaries or of any other person, to the fullest extent permitted by applicable law and Capri’s governing documents or the organizational documents of the applicable subsidiary of Capri (as applicable) or any indemnification agreements with such person in existence on the date of the Merger Agreement. The parties further agreed that all rights to elimination of liability, indemnification and advancement of expenses for acts or omissions occurring or alleged to have occurred at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, that exist in favor of the Indemnified Parties as provided in Capri’s or its subsidiaries’ respective certificate of incorporation, certificate(s) of change of name (if any), certificate(s) of merger (if any), memorandum and articles of association or bylaws (or comparable organizational documents) or in any indemnification agreement of Capri or any of its subsidiaries with any Indemnified Party in existence on the date of the Merger Agreement will survive the transactions contemplated by the Merger Agreement, and will continue in full force and effect in accordance with the terms thereof. Further, if any Indemnified Party notifies the Surviving Company on or prior to the sixth anniversary of the Effective Time of a matter in respect of which such person intends in good faith to seek indemnification pursuant to the Merger Agreement, those provisions will continue in effect with respect to such matter until the final disposition of all claims, actions, investigations, suits and proceedings relating thereto.
Tapestry has further agreed that, for six years after the Effective Time, it will maintain in effect the provisions in (i) Capri’s governing documents and (ii) any indemnification agreement of Capri or its subsidiaries with any Indemnified Party in existence on the date of the Merger Agreement, except to the extent that such agreement provides for an earlier termination, in each case, regarding elimination of liability, indemnification of officers, directors and employees and advancement of expenses that are in existence on the date of the Merger Agreement, and that no such provision may be amended, modified or repealed in any manner that would adversely affect the rights or protections thereunder of any such Indemnified Party in respect of acts or omissions occurring or alleged to have occurred at or prior to the Effective Time (including acts or omissions occurring in connection with the approval of the Merger Agreement and the consummation of the transactions thereunder).
Capri has agreed that it will, at or prior to the Effective Time, purchase a six-year prepaid “tail” policy on terms and conditions providing coverage retentions, limits and other material terms substantially equivalent to the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by Capri and its subsidiaries with respect to matters arising at or prior to the Effective Time. However, Capri will not commit or spend on such “tail” policy, in the aggregate, more than 300% of the last aggregate annual premium paid by Capri prior to the date of the Merger Agreement for its current policies of directors’ and officers’ liability insurance and fiduciary liability insurance (which we refer to as the “Base Amount”), and if the cost of such “tail” policy would otherwise exceed the Base Amount, Capri is permitted to purchase only as much coverage as reasonably practicable for the Base Amount. Capri has agreed that it will in good faith consult with Tapestry prior to the Closing with respect to the procurement of such “tail” policy, including with respect to the selection of the broker, available policy price and coverage options.
Special Meeting
Capri has agreed to:
prepare and file with the SEC this proxy statement no later than 20 business days after the date of the Merger Agreement;
respond as promptly as practicable to any comments by the SEC staff in respect of this proxy statement and file such other documents with the SEC as the SEC staff may reasonably request;
notify Tapestry promptly of the receipt of any comments from the SEC staff and of any request by the SEC staff for amendments or supplements to this proxy statement or for additional information;
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provide Tapestry with copies of all correspondence between it and any of its representatives and the SEC staff with respect to this proxy statement or the transactions contemplated by the Merger Agreement;
use reasonable best efforts to cause the commencement of the dissemination of this proxy statement to occur as promptly as reasonably practicable after the earlier of (i) two business days after the resolution of any comments of the SEC staff with respect to this proxy statement or (ii) two business days after (A) receiving notification that the SEC is not reviewing this proxy statement or (B) if the SEC has not affirmatively notified Capri by 11:59 p.m. (Eastern Time) on the tenth calendar day following the filing of this proxy statement with the SEC, oral confirmation from the staff of the SEC that the SEC is not reviewing this proxy statement; and
prior to the filing of this proxy statement (or any amendment or supplement hereto) or any dissemination hereof to its shareholders, or responding to any comments from the SEC with respect hereto, provide Tapestry with a reasonable opportunity to review and to propose comments on such document or response, which Capri will consider in good faith.
Capri has also agreed that it will:
duly call, give notice of, convene and hold the Capri Shareholders Meeting as soon as reasonably practicable and legally permitted after the date of the Merger Agreement (and in no event later than 40 days following the mailing of this proxy statement) for the purpose of obtaining the adoption of the Merger Agreement by the Capri shareholders;
use reasonable best efforts to provide Tapestry with periodic updates (including voting reports) concerning proxy solicitation results, as reasonably requested by Tapestry; and
use reasonable best efforts to (A) solicit from its shareholders proxies in favor of the adoption of the Merger Agreement and approval of the transactions contemplated thereunder and (B) take all other action necessary or advisable to secure the adoption of resolutions authorizing the Merger Agreement and the Plan of Merger and approving the Merger and the other transactions contemplated by the Merger Agreement (which we refer to as the “Capri Shareholder Approval”).
Capri may not adjourn or postpone the Special Meeting without Tapestry’s prior written consent, other than in specified circumstances (provided that Tapestry consent is always required for any adjournment of more than 10 business days).
Transaction Litigation
Capri has agreed to provide Tapestry prompt notice of any litigation brought by any shareholder of Capri or purported shareholder of Capri against it or any of its subsidiaries and/or any of their respective directors or officers relating to the Merger or any of the other related transactions or the Merger Agreement. Capri has further agreed to keep Tapestry informed on a prompt and timely basis with respect to the status thereof. Capri will give Tapestry the opportunity to participate (at Tapestry’s expense) in the defense or settlement of any such litigation and reasonably cooperate with Tapestry in conducting the defense or settlement of such litigation (provided that Capri will in any event control such defense and/or settlement), and no such settlement shall be agreed without Tapestry’s prior written consent (which consent may not be unreasonably withheld, conditioned or delayed).
Regulatory Approvals and Related Matters
Subject to the terms and conditions of the Merger Agreement, each of Tapestry and Capri has agreed to cooperate with each other and use reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws to consummate and make effective the Merger and the other transactions contemplated by the Merger Agreement and related transaction documents as promptly as practicable following the date of the Merger Agreement, including:
preparing and filing or otherwise providing, in consultation with the other party and as promptly as reasonably practicable and advisable after the date of the Merger Agreement all documentation to effect all necessary applications, notices, petitions, filings and other documents and to obtain as promptly as reasonably practicable (and in any event by the Outside Date) all waiting period expirations or
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terminations, consents, clearances, waivers, licenses, orders, registrations, approvals, permits and authorizations necessary or advisable to be obtained from any third party and/or certain governmental entities in order to consummate the transactions contemplated by the Merger Agreement (which we refer to as “Required Regulatory Approvals”); and
taking all steps as may be necessary, subject to certain limitations, to obtain all the Required Regulatory Approvals.
Specifically, in furtherance of and without limiting the generality of the above, Tapestry and Capri have agreed as promptly as reasonably practicable after the date of the Merger Agreement to:
prepare and file the notifications required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the rules and regulations promulgated thereunder (the “HSR Act”) within 15 business days;
supply, as promptly as practicable and advisable, any additional information or documentary material that may be requested pursuant to the HSR Act and to take all other actions necessary to cause the expiration or termination of the applicable waiting period under the HSR Act as soon as reasonably practicable (and in any event by the Outside Date); and
make all other necessary filings under any applicable regulatory law as promptly as reasonably practicable, and to supply as promptly as reasonably practicable and advisable any additional information and documentary materials that may be requested under any regulatory law.
However, in no event will Tapestry, Merger Sub or any of their respective subsidiaries be required to, and Capri may not, and may not permit any of its subsidiaries to, without the prior written consent of Tapestry, become subject to, consent to, or offer or agree to, take or commit to take any action with respect to, any requirement, condition, limitation, understanding, agreement or order to (A) sell, license, assign, transfer, divest, hold separate or otherwise dispose of any assets, business or portion of business of Capri, the Surviving Company, Tapestry, Merger Sub or any subsidiary of any of the foregoing or (B) impose any restriction, requirement or limitation on the operation of the business or portion of the business of Capri, the Surviving Company, Tapestry, Merger Sub or any subsidiary of any of the foregoing (unless, within such clause (B), such restriction, requirement or limitation shall have no material impact on Capri, the Surviving Company, Tapestry, Merger Sub or any subsidiary of any of the foregoing or the transactions contemplated by the Merger). However, Capri has agreed that, if requested by Tapestry, Capri or its subsidiaries will become subject to, consent to or offer or agree to, or otherwise take any action with respect to, any such requirement, condition, limitation, understanding, agreement or order so long as such requirement, condition, limitation, understanding, agreement or order is only binding on Capri or its subsidiaries in the event the Closing occurs.
The parties have further agreed to use their reasonable best efforts to defend or contest, including through litigation or other means, any objection to, or actions challenging, the consummation of the transactions contemplated by the Merger Agreement and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by the Merger Agreement.
Tapestry will, acting reasonably and considering Capri’s views in good faith, be entitled to lead the strategy and course of action for seeking and obtaining all Required Regulatory Approvals, including but not limited to directing and unilaterally determining (i) any decision to pull and refile any governmental filing or voluntarily extend any waiting period or review period under the HSR Act or any other applicable regulatory law and (ii) any decision to enter into, and the contents of, any agreement (including a timing agreement) with any governmental entity to delay and not to consummate the transactions contemplated by the Merger Agreement (provided that at the time of entry into any timing or similar agreement, the term thereof would not reasonably be expected to extend beyond such time as would allow the parties sufficient time to consummate the Closing prior to the Outside Date).
Tax Matters
Capri has agreed (i) to use commercially reasonable efforts to consult with Tapestry with respect to, and keep Tapestry reasonably apprised of, (A) any reorganizations of the corporate structure of Capri and its subsidiaries or (B) any reorganizations, restructurings, transactions or other actions by or among Capri and its subsidiaries which have a substantial or principal objective relating to tax planning, including in respect of OECD Pillar Two, in the case of each of clauses (A) and (B), (I) which have a material tax impact, but (II) excluding (x) any items set forth in the
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Capri disclosure letter and (y) any actions consistent with past practice and in the ordinary course of the tax compliance function of Capri and its subsidiaries (which we refer to collectively as “Tax Actions”), (ii) to consider in good faith any comments from Tapestry in respect of such Tax Actions, and (iii) if Tapestry reasonably objects to any such Tax Action on the basis that such Tax Action would materially increase the tax liability of Tapestry, Capri, or their respective subsidiaries after the Closing (or materially increase the risk of any material tax liability of Tapestry, Capri and their respective subsidiaries, including as a result of a tax audit, claim, or other proceeding after the Closing with respect to any taxable period (or portion thereof) ending on or before the Closing Date), not to, and to cause each of its subsidiaries not to, consummate such Tax Action unless Capri has received an opinion from a “Big-4” accounting firm or other nationally recognized accounting firm concluding that there is at least “more likely than not-level” support for the reporting position(s) with respect to such Tax Action.
Upon the written request of Tapestry and at Tapestry’s sole cost and expense, Capri has also agreed to consider in good faith any reasonable request by Tapestry that Capri and its subsidiaries make tax elections, implement restructuring transactions, or otherwise take actions, in each case, prior to the Closing, in furtherance of Tapestry’s integration and tax planning with respect to Capri and its subsidiaries; except that Capri is not required to make any tax election, implement any restructuring transaction, or otherwise take any action pursuant to this provision that Capri determines, in its discretion, exercised in good faith, not to make, implement, or take.
Other Covenants
The Merger Agreement contains other covenants, including those relating to access to information, takeover statutes, public announcements, stock exchange delisting and deregistration, matters related to Section 16 of the Exchange Act and further assurances.
Conditions to the Closing of the Merger
The respective obligations of each party to effect the Merger and other transactions contemplated by the Merger Agreement are subject to the satisfaction (or waiver by Tapestry, Merger Sub and Capri to the extent permitted by applicable law) of the following conditions:
the adoption of the resolution authorizing the Merger Agreement (including the Plan of Merger attached thereto) and approving the Merger and the other transactions contemplated by the Merger Agreement by the affirmative vote of the holders of a majority of the outstanding Capri ordinary shares;
the absence of any law, order, injunction or timing agreement issued by any governmental entity of competent jurisdiction in certain applicable jurisdictions that has the effect of restraining, enjoining or otherwise prohibiting the consummation of the Merger (the “Absence of Illegality Condition”); and
the expiration or termination of the applicable waiting period applicable to the consummation of the Merger and other transactions contemplated by the Merger Agreement under the HSR Act and the completion, expiration, termination of all applicable filings, registrations, waiting periods and approvals under other specified applicable regulatory laws (the “Government Consent Condition”).
In addition, the obligation of Capri to effect the Merger and other transactions contemplated by the Merger Agreement is subject to the satisfaction (or waiver by Capri to the extent permitted by applicable law) of the following additional cond